Larger firms (by sales or employment) have higher leverage. This pattern is explained using a model in which firms produce multiple varieties and borrow with the option to default against their future cash ow. A variety can die with a constant probability, implying that bigger firms (those with...

According to current regulation, European banks can apply zero risk weights to sovereign exposures in their balance sheet, irrespective of the assigned rating. We show that a zero risk weighting of sovereign bonds has implications by distorting banks' asset allocation decisions. Due to the lower...

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Forcing banks to recognize losses could choke off lending and amplify local economic woes, especially after financial crises. But stricter supervision could also lead to changes...

We show that the speed and type of corporate deleveraging depends on the interaction between corporate and financial sector health. Based on granular bank-firm data pertaining to small and medium-sized enterprises (SME) from five stressed and two non-stressed euro area economies, we show that...

On February 12, 2010, SUERF, the Oesterreichische Nationalbank and the Bankwissenschaftliche Gesellschaft continued their established tradition of jointly organised conferences. As evidenced also by the 115 conference participants, this year's subject of "Contagion and Spillovers – New...

We show that a reduction in lender of last resort (LOLR) policy uncertainty posi-tively affects bank lending and propagates to investment and employment. We exploita unique policy that reduced uncertainty regarding the availability of future LOLRfunding for banks as a quasi-natural experiment....

This paper shows evidence on the real effects of the bank lending channel exploiting the dramatic 2007 liquidity drought in interbank markets as a source of variation in banks' credit supply. For a large sample of Italian firms we combine information on firm-bank credit relationships, firms and...

We provide a detailed classification of core and non-core liabilities for the Turkish banking system à la Shin and Shin (2010). We further carry out a two-stage liquidity stress test similar to Van Den End (2010) where we simulate inflow and outflow factors as well as the network topology of...

Trade finance, particularly in the form of short-term letters of credit has received favourable capital treatment new Basel III rules. However, concerns have been expressed over the potential negative “unintended consequences” of the newly created leverage ratio for trade. This paper offers...

During the last decade several CESEE countries built up high external liabilities vis-à-vis foreign banking sectors, with Austrian banks being important creditors. The provision of crossborder credit allowed for rapid financial deepening in many of these countries but also led to a build-up of...