Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283006 
Year of Publication: 
2024
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 04/2024
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
How does a shock to the liquidity of bank assets affect credit supply, cross-border lending, and real activity at the firm level? We exploit that, in 2007, the European Central Bank replaced national collateral frameworks by a single list. This collateral framework shock added loans to non-domestic euro area firms to the pool of eligible assets. Using loan level data, we show that banks holding a large share of newly eligible cross-border loans increase loan supply by 14% and reduce spreads by 16 basis points, compared to banks with smaller holdings of such loans. The additional credit is mainly extended to (previously eligible) domestic borrowers, suggesting only a limited cross-border effect of the collateral framework shock. However, the shock had real effects: firms highly exposed to affected banks increase their total debt, employment, and investment.
Subjects: 
Bank Liquidity Shocks
Bank Lending Channel
Financial Integration
Real Effects
Eligibility Premia
JEL: 
E44
E58
G21
ISBN: 
978-3-95729-973-4
Document Type: 
Working Paper

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