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The impact of sovereign debt exposure on bank lending: Evidence from the European debt crisis

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  • Alexander Popov
  • Neeltje van Horen

Abstract

Using loan-level data, we find that syndicated lending by European banks with sizeable balance sheet exposures to impaired sovereign debt was negatively affected after the start of the euro area sovereign debt crisis. We also observe a reallocation away from foreign (especially US) markets. The overall reduction in lending is not driven by changes in borrower demand and/or quality, or by other types of shocks to bank balance sheets. The slowdown in lending is lower for banks that reduced their debt holdings in the later stages programs.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 382.

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Date of creation: Jun 2013
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Handle: RePEc:dnb:dnbwpp:382

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Web page: http://www.dnb.nl/en/
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Related research

Keywords: Sovereign debt; bank lending; international transmission;

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Cited by:
  1. Kapan, Tümer & Minoiu, Camelia, 2013. "Balance sheet strength and bank lending during the global financial crisis," Discussion Papers 33/2013, Deutsche Bundesbank, Research Centre.
  2. Alves, Paulo & Francisco, Paulo, 2013. "The Impact of Institutional Environment in Firms´ Capital Structure during the Recent Financial Crises," MPRA Paper 51300, University Library of Munich, Germany.

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