Bank opacity - patterns and implications
Stefan Avdjiev () and
No 992, BIS Working Papers from Bank for International Settlements
We investigate the patterns and implications of bank opacity in Europe using a rich bank-level data set. Employing a novel event study methodology, we document that public data releases by the European Banking Authority (EBA) on banks' exposures to individual countries and sectors contained information that was not previously priced by equity and CDS markets. We demonstrate that the degree of bank opacity varied considerably across bank nationalities and counterparty sectors – it was highest for European periphery banks' sovereign exposures and European core banks' private sector exposures. Furthermore, we document that underestimations of banks' credit risk by markets were associated with lower funding costs and higher wholesale borrowing (for all banks) as well as with greater risk taking and higher profitability (for European periphery banks).
Keywords: bank opacity; asymmetric information; event study; credit risk; asset markets. (search for similar items in EconPapers)
JEL-codes: F34 G21 G28 (search for similar items in EconPapers)
Pages: 48 pages
New Economics Papers: this item is included in nep-eur
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Working Paper: Bank opacity - patterns and implications (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:992
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