[Publications]

Forthcoming in the Journal of the European Economic Association (2025), Working paper version 2024, Norges Bank Working Paper 6/2021 (Previous title: Covered bonds and bank portfolio rebalancing)

with Jin Cao (Norges Bank) and Ragnar Juelsrud (Norges Bank)


Conferences:  FMA Europe 2023*, AEA 2022,  Econometric Society European Winter Meetings 2021,  DGF Innsbruck 2021 ,  NBR Spring Institute 2021*

Seminar presentations:  IFN (Research Institute of Industrial Economics) Stockholm, Sveriges Riksbanken, TU Dresden, Lund University, University of Essex, Bank of Lithuania, Bank of Slovakia, Norges Bank, Stockholm Business School, ZEW Mannheim,  Otto-von-Guercke University of Magdeburg Faculty Research Seminar, Norges Bank Brown Bag

*presented by co-author

 We use the introduction of covered bonds in Norway in 2007 together with administrative and supervisory data at the bank- and loan-level to investigate the effect of asset encumbrance on the composition of bank balance sheets and bank risk. We show that covered bonds - despite being collateralized with mortgages - leads to a shift in bank lending from mortgages to corporate loans. The marginal corporate borrower is young and low-rated, suggesting that overall credit risk increases. At the same time, we find that total balance sheet liquidity increases. Overall, the beneficial effects of increased liquidity on bank risk outweighs any negative effects of increased credit risk, ultimately reducing risk premia on total and unsecured funding. The effects are driven by banks with low initial liquidity and high risk-adjusted returns on firm lending.