We examine how banks manage carbon transition risk by selling loans given to polluting borrowers to less regulated shadow banks in securitization markets. Exploiting the election of Donald Trump as an exogenous shock that reduces carbon risk, we find that banks’ securitization decisions are sensitive to borrowers’ carbon footprints. Banks are more likely to securitize brown loans when carbon risk is high but swiftly change to keep these loans on their balance sheets when carbon risk is reduced after Trump’s election. Importantly, securitization enables banks to offer lower interest rates to polluting borrowers but does not affect the supply of green loans. Our findings are more pronounced among domestic banks and banks that do not display green lending preferences. We discuss how securitization can weaken the effectiveness of bank climate policies through reducing banks’ incentives to price carbon risk.

The establishment of the European Banking Union constitutes a major change in the regulatory framework of the banking system. Main parts are implemented via directives that show staggered transposition timing across EU member states. Based on the newly compiled Banking Union Directives Database, we assess how banks’ funding costs responded to the Capital Requirements Directive IV (CRD IV). Our findings show an upward trend in funding costs which is driven by an increase in cost of equity and partially offset by a decline in cost of debt. The diverging trends are most present in countries with an ex-ante lower regulatory capital stringency, which is in line with banks’ short-run adjustment needs but longer-run benefits from increased financial stability.

We study how deposit competition affects a bank's decision to securitize mortgages. Exploiting the state-specific removal of deposit market caps across the U.S. as a source of competition, we find a 7.1 percentage point increase in the probability that banks securitize mortgage loans. This result is driven by an 11 basis point increase in deposit costs and corresponding reductions in banks' deposit holdings. Our results are strongest among banks that rely more on deposit funding. These findings highlight a hitherto undocumented and unintended regulatory cause that motivates banks to adopt the originate-to-distribute model.

We study the corporate-loan pricing decisions of a major, systemic bank during the Greek financial crisis. A unique aspect of our data set is that we observe both the actual interest rate and the “break-even rate” (BE rate) of each loan, as computed by the bank’s own loan-pricing department (in effect, the loan’s marginal cost). We document that low-BE-rate (safer) borrowers are charged significant markups, whereas high-BE-rate (riskier) borrowers are charged smaller and even negative markups. We rationalize this de facto cross-subsidization through the lens of a dynamic model featuring depressed collateral values, impaired capital-market access, and limit pricing.

We investigate how a state's political corruption affects a resident firm's debt contracting and how a change in anti-corruption regulation alters the relation between corruption and loan contracting. Firms in more corrupt states are associated with significantly higher loan spreads and tighter loan covenants than firms in less corrupt states. Furthermore, the passage of the Dodd–Frank whistleblowing provision amplifies the conhcerns of banks about the detrimental impact of corruption due to the increased exposure of firms to whistleblowing threats. The detrimental impact of corruption is further amplified when a state has a higher level of whistleblowing involvement, when firms are located in more corrupt states or closer to the SEC office, and when the bank's state is less corrupt than the firm's state. In general, we document the externality of corruption in the debt financing of firms and the response of banks to changes in regulation.

Zur Erinnerung: Nach Jahren von Inflationsraten nahe null war die Inflationsrate in Deutschland 2022 nach der Corona-Pandemie und dem Überfall Russlands auf die Ukraine auf knapp 7% gestiegen, ähnlich hoch wie zur Energiekrise 1973/74. Die Gründe dafür sind bekannt: expansive Geld- und Finanzpolitik sowie steigende Energiepreise und Nachholeffekte beim Konsum, verbunden mit Lieferkettenproblemen gerade im Handel mit China. Seitdem haben Zentralbanken wie die EZB eine weiche Landung hingelegt. Ohne große Verluste beim Wachstum (zumindest global gesehen) wurde die Inflationsrate auf 1,6% im September 2024 gedrückt. Ein großer Erfolg?

Utilizing near real-time QuickBooks data from over 1.6 million small businesses and a targeted survey, this paper highlights the critical role credit card financing plays for small business activity. We examine a two year period beginning in January of 2021. A turbulent period during which, credit card usage by small U.S. businesses nearly doubled, interest payments rose by 60%, and delinquencies reached 2.8%. We find, first, monthly credit card payments were up to three times higher than loan payments during this time. Second, we use targeted surveys of these small businesses to establish credit cards as a key financing source in response to firm-level shocks, such as uncertain cash flows and overdue invoices. Third, we establish the importance of credit cards as an important financial transmission mechanism. Following the Federal Reserve’s rate hikes in early 2022, banks cut credit card supply, leading to a 15.75% drop in balances and a 10% decline in revenue growth, as well as a 1.5% decrease in employment growth among U.S. small businesses. These higher rates also rendered interest payments unsustainable for many, contributing to half of the observed increase in delinquencies. Lastly, a simple heterogeneous firm model with a cash-in-hand constraint illustrates the significant macroeconomic impact of credit card financing on small business activity.

We study whether and how EU banks comply with tighter macroprudential policy (MPP). Observing contractual details for more than one million securitized loans, we document an elusive risk-shifting response by EU banks in reaction to tighter loan-to-value (LTV) restrictions between 2009 and 2022. Our staggered difference-in-differences reveals that banks respond to these MPP measures at the portfolio level by issuing new loans after LTV shocks that are smaller, have shorter maturities, and show a higher collateral valuation while holding constant interest rates. Instead of contracting aggregate lending as intended by tighter MPP, banks increase the number and total volume of newly issued loans. Importantly, new loans finance especially properties in less liquid markets identified by a new European Real Estate Index (EREI), which we interpret as a novel, elusive form of risk-shifting.