We model the evolution of stylised bank loan portfolios to assess the impact of IFRS 9 and US GAAP expected loss model (ECL) on the cyclicality of loan write-off losses, loan loss provisions (LLPs) and capital ratios of banks, relative to the incurred loss model of IAS 39. We focus on the...

On implementation, IFRS 9 increases credit loss (impairment) charges and reduces after-tax profits of banks. This makes retained earnings and hence capital resources lower than what they would be under IAS 39. To maintain their capital ratios under IFRS 9, banks could elect to hold higher levels...

Large deficits have opened up on defined benefit pension schemes in the United Kingdom since 2007, and at the same time investment expenditure has been subdued; this is a common phenomenon in other countries too. We use privileged access to a unique new data set from The Pensions Regulator and two...

The Lehman Brothers event in 2008 created a large uncertainty shock that triggered an economic slowdown lasting a decade. The macroeconomic effects are well documented, but the effect on business decisions much less so. In this paper, we explore corporate data to investigate how economic...

Long-term fixed-rate mortgage contracts protect households against interest rate risk, yet most countries have relatively short interest rate fixation lengths. Using administrative data from the UK, the paper finds that the choice of fixation length tracks the life-cycle decline of credit risk...

Macroprudential policies have been shown to be beneficial during booms but there is limited evidence on how well they operate during periods of stress. Using a difference‑in‑differences empirical strategy we test whether regulatory capital buffers, a key component of the Basel III reforms,...

Shocks to energy prices can have a direct impact on homeowners’ disposable income, affecting their ability to pay their mortgage. Properties’ energy efficiency can provide some protection against the transition risk of rising energy costs. Anecdotally, lenders appear to be increasingly...

We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data from international financial centres (IFCs) – the United Kingdom, Hong Kong and Ireland – we examine how NIRP in the economies where banks...

We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. For identification, we exploit loan‑level data from the global syndicated lending market and US monetary policy surprises. We find that when US monetary policy tightens, nonbanks increase dollar...

This paper develops a dynamic model to examine the ex-ante and ex-post implications of five policy options for resolving bank failures when the authorities cannot observe the level of non-performing loans (NPLs) held by individual banks. Under asymmetric information, we show that the first-best...