Research
Research
"Research that exactly goes where you expected it to go is uninteresting on the whole." -
B. Holmström
"Research that exactly goes where you expected it to go is uninteresting on the whole." -
B. Holmström
Abstract: We investigate whether and how the environmental consciousness (greenness for short) of firms and banks is reflected in the pricing of bank credit. Using a large international sample of syndicated loans over the period 2011-2019, we find that green banks indeed reward firms for being green in the form of cheaper loans -- however, only after the ratification of the Paris Agreement in 2015. Such loans are also more likely term loans, with fewer covenants and reflect firms' project choices. Thus, we find that environmental attitudes matter “when green meets green".
Presented at (* by coauthor): NBB seminar, KU Leuven seminars, National Bank of Belgium (NBB) Colloquium about "Climate Change: Economic Impact and Challenges for Central Banks and the Financial System"*, the 2020 Annual Financial Market Liquidity (AFML) conference*, the Belgian Environmental Economics Day 2021, the 28th Finance Forum 2021*, Oxford International Finance and Banking Society (IFABS) 2021, the Workshop on Sustainable Banking 2021, the Norges Bank-CEPR Workshop: Frontier Research in Banking* , the 1st International Conference “Frontiers in International Finance and Banking”*, the 4th Contemporary Issues in Banking Conference 2021*, WU Wien* (VGSF, BBS), MGIMO*, ACPR Chair Conference 2021*, American Finance Association 2022, University of Bonn, Frankfurt School of Finance & Management, Workshop of Environmental Finance for the Common Good, Banco de Portugal Brown Bag Series*, The 4th Annual Conference Ethical Finance and Sustainability: Energy Transition & Sustainability*, Financial Intermediation Research Society (FIRS) Conference* , Greta Credit 2022 Conference "Long Run Risks" *, 2022 EBA Policy Research Workshop "Technological Innovation, Climate Finance and Banking Supervision"*
Media coverage: VoxEU, World Bank Blogs, European Economy: Sustainable Banking
Awards: SANFI Award for best banking paper at the 28th Finance Forum
SFI Research Paper Series N23-66
CEPR Discussion Paper 19152
Abstract: We measure the exposure to climate transition risks of U.S. banks’ syndicated loan books. Constructed from the carbon footprint of bank loan borrowers, the measure correlates with banks’ return sensitivities to stranded asset values. Banks' exposures decline over time, driven mainly by a shift of credit toward low-emitters. Banks with growing transition risk exposures lobby to forestall future regulatory actions that would impose stricter climate policies. High-exposure banks disclose less on climate risks in 10-K filings but provide more information when challenged during earnings calls. Overall, banks’ actions reflect limited decarbonization, incomplete disclosures, and resistance to stronger climate regulations.
Presented at (* by coauthor): SFI-SSF Conference 2023*, University of Luxembourg (seminar), Oesterreichische Nationalbank (seminar), FINEST Autumn Workshop, International Conference on Sustainability, Environment, and Social Transition in Economics and Finance (SESTEF), SAFE-Goethe University Frankfurt, Baruch Conference on ``Climate Finance and E.S. and G: Shaping a Sustainable Future'' (Poster Session), ZEW Workshop on “Ageing and Sustainable Finance”, 4th DIW Workshop WIMFEH 2024, EFA 2024*, Exeter Sustainable Finance (ESF) Conference*, DGF 2024*, 2024 Federal Reserve Stress Testing Research Conference, 2024 University of Oklahoma Climate and Energy Finance Research Conference*, Ceres-ICCR Workshop*, BIS-CEPR-Gerzensee-SFI - Conference 2025
Abstract: This paper investigates the intra-group transmission of stricter capital regulation imposed at the banking group level. Specifically, we study how a policy-induced increase in the regulatory capital ratio impacts the capital adequacy composition, lending and risk-taking of the affiliated subsidiaries. Using a combination of bank and loan-level data, we find that once a banking group faces tighter consolidated capital requirements, the recapitalization efforts are concentrated at the subsidiary- as opposed to the headquarters-level. Subsidiaries reduce risk-weighted assets in part through a reduction in credit supply. This contraction is most pronounced at subsidiaries that are either relatively small, less profitable or loosely regulated.
Presented at: KU Leuven seminars, Day-Ahead Workshop on Financial Regulation (2021), 5th Benelux Banking Research Day, IBEFA-WEAI Summer Meeting 2022, European Finance Association (EFA) 2022
Abstract: State-owned banks cyclically adjust credit allocation to selectively target financially distressed firms. Using granular loan-level data over 76 election cycles across 36 democracies, we demonstrate that state-owned banks initiate new borrowing relationships with financially weak firms to keep them afloat, prevent job losses, and maintain employment. Specifically, these loans are observed only in the lead-up to elections, targeting high-employment firms and occurring in countries with high unemployment rates. By comparing lending with non-state-controlled banks from the same country, to the same borrower industry, and in the same year, we ensure that differences in country fundamentals and changes in credit demand cannot explain our results. In the post-election period, we find that these practices lead to significant negative externalities on aggregate TFP and output.
Presented at: KU Leuven, National Bank of Belgium Seminar Series, EFiC 2023 Conference, IFABS Oxford, Frankfurt School of Finance & Management Brown Bag series, University of Maastricht, University of Bristol, ESSEC Business School, Erasmus School of Economics, Queen Mary University of London, FMARC Conference 2024, DGF 2024