Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311202 
Year of Publication: 
2025
Series/Report no.: 
IWH Discussion Papers No. 4/2025
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
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.
Subjects: 
European Real Estate Index
LTV
macroprudential policy
risk shifting
JEL: 
H30
R00
R31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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