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De-leveraging, de-risking and moral suasion in the banking sector

Author

Listed:
  • Michele Fratianni

    () (Indiana University, Kelly School of Business, Bloomington US, Univ. Plitecnica Marche and MoFiR)

  • Francesco Marchionne

    () (Nottingham Trent University, Division of Economics)

Abstract

This paper examines how banks around the world have resized and reallocated their earning assets in response to the subprime and sovereign debt crises. We also focus on the interaction between sovereign debt and the asset allocation process. We find that banks have readjusted asset shares and the overall regulatory credit risk by substituting government securities for loans. Furthermore, they have been sensitive to those variables that are of direct interest to the regulator, a result that is consistent with high-debt governments having exerting moral suasion on banks to privilege the purchase of government securities over credit to the private sector.

Suggested Citation

  • Michele Fratianni & Francesco Marchionne, 2015. "De-leveraging, de-risking and moral suasion in the banking sector," Mo.Fi.R. Working Papers 103, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:103
    as

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    File URL: http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir103.pdf
    File Function: First version, 2015
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    References listed on IDEAS

    as
    1. Fratianni, Michele & Marchionne, Francesco, 2013. "The fading stock market response to announcements of bank bailouts," Journal of Financial Stability, Elsevier, vol. 9(1), pages 69-89.
    2. repec:oup:jeurec:v:16:y:2018:i:3:p:696-729. is not listed on IDEAS
    3. Broner, Fernando & Erce, Aitor & Martin, Alberto & Ventura, Jaume, 2014. "Sovereign debt markets in turbulent times: Creditor discrimination and crowding-out effects," Journal of Monetary Economics, Elsevier, vol. 61(C), pages 114-142.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    crisis; loans; moral suasion; regulator; securities;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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