We study whether and how EU banks comply with tighter macroprudential policy (MPP). Observing contractual details for more than one million securitized loans, we document an elusive risk-shifting response by EU banks in reaction to tighter loan-to-value (LTV) restrictions between 2009 and 2022....

A large literature at the intersection of economics and finance offers prescriptions for regulating banks to increase financial stability. This literature abstracts from the discretion that accounting standards give banks over financial reporting, creating a gap between the information assumed...