Bank risk and monetary policy

Yener Altunbas (), Leonardo Gambacorta () and Marques-Ibanez, David ()
Additional contact information
Yener Altunbas: University of Wales, Bangor, Gwynedd LL57 2DG, Wales, United Kingdom., http://www.bangor.ac.uk/
Marques-Ibanez, David: European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany., http://www.ecb.europa.eu/home/html/index.en.html
Authors registered in the RePEc Author Service: David Marqués Ibañez

No 1075, Working Paper Series from European Central Bank

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. JEL Classification: E44, E55.

Keywords: bank; risk; bank lending channel; monetary policy. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac, nep-mon and nep-rmg
Date: 2009-07

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Working Paper: Bank risk and monetary policy (2009)
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