Research output

Credit Supply: Are there negative spillovers from banks’ proprietary trading?

Research output: Working paperProfessional

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Credit Supply: Are there negative spillovers from banks’ proprietary trading? / Kurz, Michael; Kleimeier, Stefanie.

GSBE, 2019. (GSBE Research Memoranda; No. 005).

Research output: Working paperProfessional

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Bibtex

@techreport{0f29b6fb03f243428cc9fd3b36792798,
title = "Credit Supply: Are there negative spillovers from banks’ proprietary trading?",
abstract = "Do banks that heavily engage in proprietary trading reduce credit supply relative to their non-trading peers? We answer this question by looking at credit provided by the 135 leading banks in the global corporate loan market between 2003 and 2016. We find that banks with greater trading expertise supply less credit during economically stable times than their non-trading peers and even less during crisis times. This double effect can be attributed to US banks. International banks only reduce their credit supply during crises. We show that these spillovers from trading to credit supply have adverse consequences for the real economy as firms’ ability to invest in capital and expand their workforce is reduced. During a crisis, firms that rely on banks with high trading expertise are most severely affected. Overall, our results suggest that the mandates by global regulators to separate trading from commercial banking are well advised.",
keywords = "credit supply, proprietary trading, international lending, banking, corporate loans",
author = "Michael Kurz and Stefanie Kleimeier",
year = "2019",
month = "2",
day = "7",
language = "English",
series = "GSBE Research Memoranda",
publisher = "GSBE",
number = "005",
type = "WorkingPaper",
institution = "GSBE",

}

RIS

TY - UNPB

T1 - Credit Supply: Are there negative spillovers from banks’ proprietary trading?

AU - Kurz,Michael

AU - Kleimeier,Stefanie

PY - 2019/2/7

Y1 - 2019/2/7

N2 - Do banks that heavily engage in proprietary trading reduce credit supply relative to their non-trading peers? We answer this question by looking at credit provided by the 135 leading banks in the global corporate loan market between 2003 and 2016. We find that banks with greater trading expertise supply less credit during economically stable times than their non-trading peers and even less during crisis times. This double effect can be attributed to US banks. International banks only reduce their credit supply during crises. We show that these spillovers from trading to credit supply have adverse consequences for the real economy as firms’ ability to invest in capital and expand their workforce is reduced. During a crisis, firms that rely on banks with high trading expertise are most severely affected. Overall, our results suggest that the mandates by global regulators to separate trading from commercial banking are well advised.

AB - Do banks that heavily engage in proprietary trading reduce credit supply relative to their non-trading peers? We answer this question by looking at credit provided by the 135 leading banks in the global corporate loan market between 2003 and 2016. We find that banks with greater trading expertise supply less credit during economically stable times than their non-trading peers and even less during crisis times. This double effect can be attributed to US banks. International banks only reduce their credit supply during crises. We show that these spillovers from trading to credit supply have adverse consequences for the real economy as firms’ ability to invest in capital and expand their workforce is reduced. During a crisis, firms that rely on banks with high trading expertise are most severely affected. Overall, our results suggest that the mandates by global regulators to separate trading from commercial banking are well advised.

KW - credit supply

KW - proprietary trading

KW - international lending

KW - banking

KW - corporate loans

M3 - Working paper

T3 - GSBE Research Memoranda

BT - Credit Supply: Are there negative spillovers from banks’ proprietary trading?

PB - GSBE

ER -