This paper studies how banks’ balance sheets and funding costs interact in the transmission of monetary-policy rates to banks’ credit supply to firms. To do so, we use credit-registry data from Germany and Portugal together with the European Central Bank’s policy-rate cuts in mid-2014. The...

We analyze the strategic interaction between undercapitalized banks and a supervisor who may intervene by preventive recapitalization. Supervisory forbearance emerges because political and fiscal costs undermine supervisors' commitment to intervene. When supervisors have lower credibility,...

Traditional theory suggests that higher bank profitability (or franchise value) dissuades bank risk-taking. We highlight an opposite effect: higher profitability loosens bank borrowing constraints. This enables profitable banks to take risk on a larger scale, inducing risk-taking. This effect is...

This paper provides evidence of deliberate private-information disclosure within banks’ international business networks. Using supervisory trade-level data, we show that banks with closer ties to a target advisor in a takeover buy more stocks of the target firm prior to the deal announcement,...

We investigate the relationship between bank complexity and bank risk-taking using German banking data over the period 2005-2017. We find that more complex banking organizations tend to take on more risk, but that this complexity-risk nexus decreases over time. We study how regulatory...