Is the Leverage of European Banks Procyclical?

16 Pages Posted: 12 Feb 2011 Last revised: 3 Sep 2012

See all articles by Angelo S. Baglioni

Angelo S. Baglioni

Catholic University of the Sacred Heart of Milan

Elena Beccalli

Catholic University of the Sacred Heart of Milan - Institute of Economy and Finance

Andrea Boitani

Catholic University of the Sacred Heart of Milan

Andrea Monticini

Catholic University of the Sacred Heart of Milan - Institute of Economy and Finance

Date Written: January 11, 2011

Abstract

Detecting whether banks' leverage is indeed procyclical is relevant to support the view that booms and crises may be reinforced by some sort of supply side financial accelerator, whilst finding a plausible explanation of banks' behaviour is crucial to trace the road for a sensible reform of financial regulation and managers' incentives. By analyzing a large sample of European banks, we show that procyclical leverage appears to be well entrenched in the behaviour of those banks for which investment banking prevails over the traditional commercial banking activity.

Keywords: Banks, Procyclicality, Financial Regulation

JEL Classification: G21, E3

Suggested Citation

Baglioni, Angelo and Beccalli, Elena and Boitani, Andrea and Monticini, Andrea, Is the Leverage of European Banks Procyclical? (January 11, 2011). Available at SSRN: https://ssrn.com/abstract=1760028 or http://dx.doi.org/10.2139/ssrn.1760028

Angelo Baglioni (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, n.1
Milano, 20123
Italy
390272344024 (Phone)
390272342781 (Fax)

Elena Beccalli

Catholic University of the Sacred Heart of Milan - Institute of Economy and Finance ( email )

Via Necchi 5
20123 Milano
Italy

Andrea Boitani

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Andrea Monticini

Catholic University of the Sacred Heart of Milan - Institute of Economy and Finance ( email )

Via Necchi 5
20123 Milano
Italy

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