Bank Risk and Monetary Policy

36 Pages Posted: 13 Dec 2009

See all articles by Yener Altunbas

Yener Altunbas

University of Wales, Bangor

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

David Marques-Ibanez

European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: May 10, 2009

Abstract

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 diminish the informational content of standard bank balance-sheet indicators. We show that bank risk conditions, as perceived by financial market investors, need to be considered, together with the other indicators (i.e. size, liquidity and capitalization), traditionally used in the bank lending channel literature to assess a bank’s ability and willingness to supply new loans. Using a large sample of European banks, we find that banks characterized by lower expected default frequency are able to offer a larger amount of credit and to better insulate their loan supply from monetary policy changes.

Keywords: Bank, Risk, Bank Lending Channel, Monetary Policy

JEL Classification: E44, E52

Suggested Citation

Altunbas, Yener and Gambacorta, Leonardo and Marques-Ibanez, David, Bank Risk and Monetary Policy (May 10, 2009). Bank of Italy Temi di Discussione (Working Paper) No. 712, Available at SSRN: https://ssrn.com/abstract=1521512 or http://dx.doi.org/10.2139/ssrn.1521512

Yener Altunbas

University of Wales, Bangor ( email )

Bangor, Wales LL57 2DG
United Kingdom

Leonardo Gambacorta (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Marques-Ibanez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

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