Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153509 
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper No. 1075
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
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.
Subjects: 
bank
bank lending channel
monetary policy
risk
JEL: 
E44
E55
Document Type: 
Working Paper

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