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Working Paper
International financial integration, crises, and monetary policy: evidence from the euro area interbank crises
We analyze how financial crises affect international financial integration, exploiting euro area proprietary interbank data, crisis and monetary policy shocks, and variation in loan terms to the same borrower on the same day by domestic versus foreign lenders. Crisis shocks reduce the supply of crossborder liquidity, with stronger volume effects than pricing effects, thereby impairing international financial integration. On the extensive margin, there is flight to home ? but this is independent of quality. On the intensive margin, however, GIPS-headquartered debtor banks suffer in the Lehman ...
Working Paper
The Rise of Shadow Banking : Evidence from Capital Regulation
We investigate the connections between bank capital regulation and the prevalence of lightly regulated nonbanks (shadow banks) in the U.S. corporate loan market. For identification, we exploit a supervisory credit register of syndicated loans, loan-time fixed-effects, and shocks to capital requirements arising from surprise features of the U.S. implementation of Basel III. We find that less-capitalized banks reduce loan retention and nonbanks step in, particularly among loans with higher capital requirements and at times when capital is scarce. This reallocation has important spillovers: ...
Working Paper
Stressed Banks? Evidence from the Largest-Ever Supervisory Review
We study short-term and medium-term changes in bank risk-taking as a result of supervision, and the associated real effects. For identification, we exploit the European Central Bank's asset-quality review (AQR) in conjunction with security and credit registers. After the AQR announcement, reviewed banks reduce riskier securities and credit supply, with the greatest effect on riskiest securities. We find negative spillovers on asset prices and firm-level credit availability. Moreover, non-banks with higher exposure to reviewed banks acquire the shed risk. After the AQR compliance, reviewed ...
Working Paper
QE, Bank Liquidity Risk Management, and Non-Bank Funding: Evidence from U.S. Administrative Data
We show that the effectiveness of unconventional monetary policy is limited by how banks adjust credit supply and manage liquidity risk in response to fragile non-bank funding. For identification, we use granular U.S. administrative data on deposit accounts and loan-level commitments, matched with bank-firm supervisory balance sheets. Quantitative easing increases bank fragility by triggering a large inflow of uninsured deposits from non-bank financial institutions. In response, banks that are more exposed to this fragility actively manage their liquidity risk by offering better rates to ...
Working Paper
The International Bank Lending Channel of Monetary Policy Rates and QE: Credit Supply, Reach-for-Yield, and Real Effects
We identify the international credit channel of monetary policy by analyzing the universe of corporate loans in Mexico, matched with firm and bank balance-sheet data, and by exploiting foreign monetary policy shocks, given the large presence of European and U.S. banks in Mexico. We find that a softening of foreign monetary policy increases the supply of credit of foreign banks to Mexican firms. Each regional policy shock affects supply via their respective banks (for example, U.K. monetary policy affects credit supply in Mexico via U.K. banks), in turn implying strong real effects, with ...
Working Paper
Expansionary Austerity: Reallocating Credit Amid Fiscal Consolidation
We study the impact of public debt limits on economic growth exploiting the introduction of a Mexican law capping the debt of subnational governments. Despite larger fiscal consolidation, states with higher ex-ante public debt grew substantially faster after the law, albeit at the expense of increased extreme poverty. Credit registry data suggests that the mechanism behind this result is a reduction in crowding out. After the law, banks operating in more indebted states reallocate credit away from local governments and into private firms. The unwinding of crowding out is stronger for riskier ...
Conference Paper
Evidence on the impact of monetary policy on bank credit risk
Working Paper
Nonbank Lenders as Global Shock Absorbers: Evidence from US Monetary Policy Spillovers
We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. We exploit loan-level data from the global syndicated lending market and US monetary policy surprises. When US policy tightens, nonbanks increase dollar credit supply to non-US firms (relative to banks), mitigating the dollar credit reduction. This increase is stronger for riskier firms, proxied by emerging market firms, high-yield firms, or firms in countries with stronger capital inflow restrictions. However, firm-lender matching, zombie lending, fragile-nonbank lending, or periods of low vs ...