12.03.2024 • 8/2024
Risk in the banking sector: four out of ten top supervisors come from the financial industry
Europe's banks realise excess returns on the stock market when their alumni join the boards of national supervisory authorities. A study by the Halle Institute for Economic Research (IWH) shows that this happens more frequently than previously recognised. The findings indicate a risk to financial stability and call for a more merit-based, transparent appointment of senior regulators.
Michael Koetter
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OVERHANG: Debt overhang and green investments
OVERHANG: Debt overhang and green investments - the role of banks in climate-friendly management of emission-intensive fixed assets Subproject 1: Policy Changes, Lending and…
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Research Groups
Our Research Groups Banking, Regulation, and Incentive Structures Data Science in Financial Economics Econometric Tools for Macroeconomic Forecasting and Simulation Education,…
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PhD Graduates Financial Markets
PhD Graduates of the Department of Financial Markets Eleonora Sfrappini: "Four Essays on Banking, Climate Risks and Financial Regulation" (2024) Willam McShane: "The Competitive…
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Global Banks and Synthetic Funding: The Benefits of Foreign Relatives
Fernando Eguren-Martin, Matias Ossandon Busch, Dennis Reinhardt
Journal of Money, Credit and Banking,
Vol. 56 (1),
2024
Abstract
Abstract This paper examines the effect of dislocations in foreign currency (FX) swap markets ("CIP deviations") on bank lending. Using data from UK banks we show that when the cost of obtaining swap-based funds in a particular foreign currency increases, banks reduce the supply of cross-border credit in that currency. This effect is increasing in the degree of banks' reliance on swap-based FX funding. Access to foreign relatives matters as banks employ internal capital markets to shield their cross-border FX lending supply from the described channel. Partial substitution occurs from banks outside the UK not affected by changes in synthetic funding costs.
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Regulation and Information Costs of Sovereign Distress: Evidence from Corporate Lending Markets
Iftekhar Hasan, Suk-Joong Kim, Panagiotis Politsidis, Eliza Wu
Journal of Corporate Finance,
Vol. 82 (October),
2023
Abstract
We examine the effect of sovereign credit impairments on the pricing of syndicated loans following rating downgrades in the borrowing firms' countries of domicile. We find that the sovereign ceiling policies used by credit rating agencies create a disproportionately adverse impact on the bounded firms' borrowing costs relative to other domestic firms following their sovereign's rating downgrade. Rating-based regulatory frictions partially explain our results. On the supply-side, loans carry a higher spread when granted from low-capital banks, non-bank lenders, and banks with high market power. We further document an operating demand-side channel, contingent on borrowers' size, financial constraints, and global diversification. Our results can be attributed to the relative bargaining power between lenders and borrowers: relationship borrowers and non-bank dependent borrowers with alternative financing sources are much less affected.
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Financial Stability
Financial Systems: The Anatomy of the Market Economy How the financial system is constructed, how it works, how to keep it fit and what good a bit of chocolate can do. Dossier In…
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The Political Economy of the European Banking Union
The Political Economy of the European Banking Union Junior Professorship Lena Tonzer, PhD: The Political Economy of the European Banking Union: Causes for National Differences in…
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Loose (Interview)
When there were almost no flats in Halle yet ... Brigitte Loose about IWH's foundation and development Ms Loose, how did you experience the early days of IWH? Looking back, it was…
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Brown Bag Seminar
Brown Bag Seminar Financial Markets Department The seminar series "Brown Bag Seminar" was offered on a regular basis by members of the Financial Markets department and their…
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