Securities Trading by Banks and Credit Supply: Micro-Evidence

Rajkamal Iyer, Peydró, José-Luis, Puriya Abbassi and Francesc Rodríguez Tous
Authors registered in the RePEc Author Service: Jose-Luis Peydro

No 10480, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze securities trading by banks and the associated spillovers to the supply of credit. Empirical analysis has been elusive due to the lack of securities register for banks. We use a unique, proprietary dataset that has the investments of banks at the security level for 2005-2012 in conjunction with the credit register from Germany. Analyzing data at the security level for each bank in each period, we find that during the crisis, banks with higher trading expertise increase their overall investments in securities, especially in those that had a larger price drop. The quantitative effects are largest for trading-expertise banks with higher capital and in securities with lower rating and long-term maturity. In fact, there are no differential effects for triple-A rated securities. Moreover, banks with higher trading expertise reduce their overall supply of credit in crisis times ? i.e., for the same borrower at the same time, trading-expertise banks reduce lending relative to other banks. This effect is more pronounced for trading-expertise banks with higher capital, and the credit reduction is binding at the firm level. Finally, these differential effects for trading-expertise banks are not present outside the crisis period

Keywords: Banking; Investments; Bank capital; Credit supply; Risk-taking (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
https://cepr.org/publications/DP10480 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Securities Trading by Banks and Credit Supply: Micro-Evidence (2015)
Working Paper: Securities trading by banks and credit supply: Micro-evidence (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10480

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10480

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().