Suchergebnisse

Government interventions into the financial system in the form of bail out operations or liquidity assistance are often justified with the systemic importance of large banks for the real economy. In this paper, we test whether idiosyncratic shocks to loan growth at large banks have effects on real GDP growth. We employ a measure of idiosyncratic shocks which follows Gabaix (2009). He shows that idiosyncratic shocks at large firms have an impact on GDP growth in the US. We apply this idea to the banking sector. We find evidence that changes in lending by large banks have a significant impact on GDP growth. This effect is mostly driven by episodes of negative loan growth rates and by the Eastern European countries in our sample.

Macroeconomic risks could magnify individual bank risk. Mitigating the influence of economy-wide risks on banks could therefore be very important to maintain a smooth-running banking system. In this paper, we explore the extent to which macroeconomic risks affect banks. We use a bank-level dataset on over 2,000 banks worldwide for the years 1995-2002 to study the effect of macroeconomic volatility, the openness of the banking system, and banking regulations on bank risks. Our measure of bank risk is the volatility of banks? pretax profits. We find that macroeconomic volatility increases banks? profit volatility and that international openness of the banking system lowers bank risk. We find no impact of banking regulation on profit volatility. Our findings suggest that if policymakers want to lower bank risk, they should seek to lower macroeconomic volatility as well as increase openness in the banking system.

SUMMARY
We analyse the determinants of coverage ratios and their components [non-performing loans (NPLs) and loss loan reserves] in a large sample of European banks. We find that bank-specific factors, particularly credit risk variables (including forward-looking indicators) and capitalization, matter the most. Coverage ratios adjust insufficiently as asset quality deteriorates, except in high-NPL banks. Capitalization has a positive effect on coverage ratio, pointing to a complementarity between the two buffers. At the country level, specific macroprudential levers and developing NPL secondary markets enhance coverage ratios. Our findings emphasize the importance of micro oversight and call for more stringent macro policies in high-NPL countries.