exposures significantly amplified the transmission of risk from the sovereign and its impact on lending. This amplification of … the impact on lending cannot be ascribed to spurious correlation or reverse causality. …

This paper analyzes the effect of bank recapitalizations on lending, funding and asset quality of European banks … sufficiently large recapitalization increase lending, attract more deposits and clean up their balance sheets. In contrast, banks … that receive a small recapitalization relative to their capital shortfall reduce lending and shrink assets. These results …