Suchergebnisse

We study whether a pre-existing link between bank and sovereign credit risk biased euro area banks' sovereign debt portfolio choices during 2011Q4 and 2012Q1 – a period of exceptional increases in their domestic sovereign bond holdings. We find that banks whose creditworthiness is linked to that of the respective sovereign tended to purchase higher amounts of domestic sovereign bonds relative to their main assets if the CDS spreads on domestic sovereign bonds were higher. Moreover, for elevated sovereign CDS levels, banks whose creditworthiness is ex ante more strongly positively correlated with that of the local sovereign exhibit larger purchases of domestic government bonds. These findings are consistent with 'risk shifting' behaviour, where by investing in domestic government bonds banks earn the full, high risk premium while the risk is largely borne by their creditors as it materialises in states of the world where the banks are likely to be insolvent anyway. As a result, domestic sovereign debt offers ex ante higher returns to bank shareholders than alternative ways to build up precautionary liquidity buffers or indeed to execute carry trades, such as to invest in non-domestic government bonds.

We investigate whether government credit guarantee schemes, extensively used at the onset of the Covid-19 pandemic, led to substitution of non-guaranteed with guaranteed credit rather than fully adding to the supply of lending. We study this issue using a unique euro-area credit register data, matched with supervisory bank data, and establish two main findings. First, guaranteed loans were mostly extended to small but comparatively creditworthy firms in sectors severely affected by the pandemic, borrowing from large, liquid and well-capitalized banks. Second, guaranteed loans partially substitute pre-existing non-guaranteed debt. For firms borrowing from multiple banks, the substitution mainly arises from the lending behavior of the bank extending guaranteed loans. Substitution was highest for funding granted to riskier and smaller firms in sectors more affected by the pandemic, and borrowing from larger and stronger banks. Overall, the evidence indicates that government guarantees contributed to the continued extension of credit to relatively creditworthy firms hit by the pandemic, but also benefited banks' balance sheets to some extent.

We investigate whether government credit guarantee schemes, extensively used at the onset of the Covid-19 pandemic, led to substitution of non-guaranteed with guaranteed credit rather than fully adding to the supply of lending. We study this issue using a unique euro-area credit register data, matched with supervisory bank data, and establish two main findings. First, guaranteed loans were mostly extended to small but comparatively creditworthy firms in sectors severely affected by the pandemic, borrowing from large, liquid and well-capitalized banks. Second, guaranteed loans partially substitute pre-existing non-guaranteed debt. For firms borrowing from multiple banks, the substitution mainly arises from the lending behavior of the bank extending guaranteed loans. Substitution was highest for funding granted to riskier and smaller firms in sectors more affected by the pandemic, and borrowing from larger and stronger banks. Overall, the evidence indicates that government guarantees contributed to the continued extension of credit to relatively creditworthy firms hit by the pandemic, but also benefited banks' balance sheets to some extent.