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 diminishthe informational content of standard bank balance-sheet indicators. We … indicators (i.e. size, liquidity and capitalization), traditionallyused in the bank lending channel literature to assess a bank …

reflect contemporaneous information about bank riskin the United States and in Europe.2 In our study, we firstexamine the …-to-noise ratio ofsubordinated debt spreads should be quite low far away fromthe default point of the bank. We then summarise the …