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Bank risk and monetary policy

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  • Yener Altunbas

    () (University of Wales)

  • Leonardo Gambacorta

    () (Bank for International Settlements)

  • David Marqués-Ibáñez

    () (European Central Bank)

Abstract

We find evidence of a bank lending channel for the euro area operating via bank risk. Financial innovation and the new ways to transfer credit risk have tended to diminish the informational content of standard bank balance-sheet indicators. We show that bank risk conditions, as perceived by financial market investors, need to be considered, together with the other indicators (i.e. size, liquidity and capitalization), traditionally used in the bank lending channel literature to assess a bankÂ’s ability and willingness to supply new loans. Using a large sample of European banks, we find that banks characterized by lower expected default frequency are able to offer a larger amount of credit and to better insulate their loan supply from monetary policy changes.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 712.

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Date of creation: May 2009
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Handle: RePEc:bdi:wptemi:td_712_09

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Keywords: Bank; Risk; Bank Lending Channel; Monetary Policy;

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References

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Citations

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Cited by:
  1. Lorenzo Cappiello & Arjan Kadareja & Christoffer Kok Sørensen & Marco Protopapa, 2010. "Do bank loans and credit standards have an effect on output? A panel approach for the euro area," Working Paper Series 1150, European Central Bank.
  2. Itai Agur & Maria Demertzis, 2011. ""Leaning Against the Wind" and the Timing of Monetary Pollicy," DNB Working Papers 303, Netherlands Central Bank, Research Department.
  3. Martha López P. & Fernando Tenjo G. & Héctor Zárate Solano, . "The Risk-Taking Channel and Monetary Transmission Mechanism in Colombia," Borradores de Economia 616, Banco de la Republica de Colombia.
  4. Agur, I. & Demertzis, M., 2010. "Monetary Policy and Excessive Bank Risk Taking," Discussion Paper 2010-30S, Tilburg University, Center for Economic Research.
  5. Delis, Manthos D & Kouretas, Georgios & Tsoumas, Chris, 2011. "Anxious periods and bank lending," MPRA Paper 32422, University Library of Munich, Germany.
  6. Gabe de Bondt & Angela Maddaloni & José-Luis Peydró & Silvia Scopel, 2010. "The euro area Bank Lending Survey matters - empirical evidence for credit and output growth," Working Paper Series 1160, European Central Bank.
  7. Altunbas, Yener & Gambacorta, Leonardo & Marques-Ibanez, David, 2009. "Securitisation and the bank lending channel," European Economic Review, Elsevier, vol. 53(8), pages 996-1009, November.
  8. Samer Eid, 2011. "Monetary policy, risk-taking channel and income structure: an empirical assessment of the French banking system," Post-Print dumas-00643715, HAL.
  9. Ivo Arnold & Clemens Kool & Katharina Raabe, 2011. "Industry Effects of Bank Lending in Germany," Working Papers 11-21, Utrecht School of Economics.
  10. Itai Agur & Maria Demertzis, 2012. "Excessive bank risk taking and monetary policy," Working Paper Series 1457, European Central Bank.
  11. Luis Eduardo Arango Thomas & Diana carolina Escobar & Emma Monsalve, 2013. "Subempleo por ingresos y funcionamiento del mercado de trabajo en Colombia," Borradores de Economia 763, Banco de la Republica de Colombia.
  12. Abdul Majid, Muhamed Zulkhibri, 2010. "Bank-characteristics, lending channel and monetary policy in Malaysia: evidence from bank-level data," MPRA Paper 30052, University Library of Munich, Germany.
  13. Düwel, Cornelia & Frey, Rainer & Lipponer, Alexander, 2011. "Cross-border bank lending, risk aversion and the financial crisis," Discussion Paper Series 1: Economic Studies 2011,29, Deutsche Bundesbank, Research Centre.
  14. Tomas Adam & Sona Benecka & Ivo Jansky, 2012. "Time-Varying Betas of Banking Sectors," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(6), pages 485-504, December.
  15. Teodora Paligorova & João A. C. Santos, 2012. "When Is It Less Costly for Risky Firms to Borrow? Evidence from the Bank Risk-Taking Channel of Monetary Policy," Working Papers 12-10, Bank of Canada.

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