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.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.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.doi http://dx.doi.org/10.1016/j.jfineco.2016.05.005
• dc.identifier.issn 0304-405X
• dc.identifier.uri http://hdl.handle.net/10230/37076
• dc.language.iso eng
• dc.publisher Elsevier
• dc.relation.ispartof Journal of Financial Economics. 2016;121(3):569-94.
• dc.relation.projectID info:eu-repo/grantAgreement/ES/3PN/ECO2012-32434
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/648398
• dc.rights © Elsevier http://dx.doi.org/10.1016/j.jfineco.2016.05.005
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Banking
• dc.subject.keyword Investments
• dc.subject.keyword Bank capital
• dc.subject.keyword Credit supply
• dc.subject.keyword Public subsidies
• dc.title Securities trading by banks and credit supply: micro-evidence from the crisis
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion