Credit Supply: Are there negative spillovers from banks’ proprietary trading? (RM/19/005-revised-)

Michael Kurz, Stefanie Kleimeier

Research output: Working paperProfessional

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Abstract

Following the global financial crisis, policy makers considered regulations that restrict banks’ activities which were motivated by concerns that banks use central bank borrowing, government guarantees, or subsidies to fund securities trading instead of lending to the real economy. Using a global sample of 132 major banks from 2003 to 2016, we find that banks’ securities trading is indeed associated with decreased loan supply. Effects are stronger for domestic lending markets, during crisis periods, and in countries with deeper financial markets. However, corporate capital expenditures and employment growth are unaffected, suggesting that
policy makers’ concerns are only partly justified.
Original languageEnglish
PublisherMaastricht University, Graduate School of Business and Economics
Number of pages67
Publication statusPublished - 24 Oct 2019

Keywords

  • credit supply
  • proprietary trading
  • international lending
  • banking
  • corporate loans

Cite this

Kurz, M., & Kleimeier, S. (2019). Credit Supply: Are there negative spillovers from banks’ proprietary trading? (RM/19/005-revised-). Maastricht University, Graduate School of Business and Economics.
Kurz, Michael ; Kleimeier, Stefanie. / Credit Supply: Are there negative spillovers from banks’ proprietary trading? (RM/19/005-revised-). Maastricht University, Graduate School of Business and Economics, 2019.
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Kurz, M & Kleimeier, S 2019 'Credit Supply: Are there negative spillovers from banks’ proprietary trading? (RM/19/005-revised-)' Maastricht University, Graduate School of Business and Economics.

Credit Supply: Are there negative spillovers from banks’ proprietary trading? (RM/19/005-revised-). / Kurz, Michael; Kleimeier, Stefanie.

Maastricht University, Graduate School of Business and Economics, 2019.

Research output: Working paperProfessional

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N2 - Following the global financial crisis, policy makers considered regulations that restrict banks’ activities which were motivated by concerns that banks use central bank borrowing, government guarantees, or subsidies to fund securities trading instead of lending to the real economy. Using a global sample of 132 major banks from 2003 to 2016, we find that banks’ securities trading is indeed associated with decreased loan supply. Effects are stronger for domestic lending markets, during crisis periods, and in countries with deeper financial markets. However, corporate capital expenditures and employment growth are unaffected, suggesting thatpolicy makers’ concerns are only partly justified.

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Kurz M, Kleimeier S. Credit Supply: Are there negative spillovers from banks’ proprietary trading? (RM/19/005-revised-). Maastricht University, Graduate School of Business and Economics. 2019 Oct 24.