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Securities trading by banks and credit supply: micro-evidence from the crisis

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dc.contributor.author Abbassi, Puriya
dc.contributor.author Iyer, Rajkamal
dc.contributor.author Peydró, José-Luis
dc.contributor.author Rodríguez-Tous, Francesc
dc.date.accessioned 2019-04-10T07:58:34Z
dc.date.available 2019-04-10T07:58:34Z
dc.date.issued 2016
dc.identifier.citation Abbassi P, Iyer R, Peydró JL, Rodríguez-Tous F. Securities trading by banks and credit supply: micro-evidence from the crisis. J Financ Econ. 2016;121(3):569-94. DOI: 10.1016/j.jfineco.2016.05.005
dc.identifier.issn 0304-405X
dc.identifier.uri http://hdl.handle.net/10230/37076
dc.description.abstract We analyze securities trading by banks during the crisis and the associated spillovers to the supply of credit. We use a proprietary data set that has the investments of banks at the security level for 2005–2012 in conjunction with the credit register from Germany. We find that—during the crisis—banks with higher trading expertise (trading banks) increase their investments in securities, especially in those that had a larger price drop, with the strongest impact in low-rated and long-term securities. Moreover, trading banks reduce their credit supply, and the credit crunch is binding at the firm level. All of the effects are more pronounced for trading banks with higher capital levels. Finally, banks use central bank liquidity and government subsidies like public recapitalization and implicit guarantees mainly to support trading of securities. Overall, our results suggest an externality arising from fire sales in securities markets on credit supply via the trading behavior of banks.
dc.description.sponsorship Peydró acknowledges financial support from both the Spanish Ministry of Economics and Competitiveness (project ECO2012-32434) and the European Research Council Grant (project 648398).
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Elsevier
dc.relation.ispartof Journal of Financial Economics. 2016;121(3):569-94.
dc.rights © Elsevier http://dx.doi.org/10.1016/j.jfineco.2016.05.005
dc.title Securities trading by banks and credit supply: micro-evidence from the crisis
dc.type info:eu-repo/semantics/article
dc.identifier.doi http://dx.doi.org/10.1016/j.jfineco.2016.05.005
dc.subject.keyword Banking
dc.subject.keyword Investments
dc.subject.keyword Bank capital
dc.subject.keyword Credit supply
dc.subject.keyword Public subsidies
dc.relation.projectID info:eu-repo/grantAgreement/ES/3PN/ECO2012-32434
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/648398
dc.rights.accessRights info:eu-repo/semantics/openAccess
dc.type.version info:eu-repo/semantics/acceptedVersion


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