Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/217048
Authors: 
Abbassi, Puriya
Iyer, Rajkamal
Peydró, José-Luis
Soto, Paul
Year of Publication: 
2020
Abstract: 
Regulation needs effective supervision; but regulated entities may deviate with unobserved actions. For identification, we analyze banks, exploiting ECB’s asset-quality-review (AQR) and supervisory security and credit registers. After AQR announcement, reviewed banks reduce riskier securities and credit (also overall securities and credit supply), with largest impact on riskiest securities (not on riskiest credit), and immediate negative spillovers on asset prices and firm-level credit supply. Exposed (unregulated) nonbanks buy the shed risk. AQR drives the results, not the end-of-year. After AQR compliance, reviewed banks reload riskier securities, but not riskier credit, with medium-term negative firm-level real effects (costs of supervision/safe-assets increase).
Subjects: 
asset quality review
stress tests
supervision
risk-masking
costs of safe assets
JEL: 
E58
G21
G28
H63
L51
Document Type: 
Working Paper

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