We use a quasi-experimental research design to examine the effect of model-based capital regulation introduced under the Basel II agreement on the pro-cyclicality of bank lending and firms' access to funds during a recession. In response to an exogenous shock to credit risk in the German...

Foreign banks play a prominent role in syndicated loan markets. In this paper we examine foreign banks' motives in participating in cross-border deals in 25 European countries. We find that usual explanations of foreign banking activities can only account partly for the high rate of foreign...

Although the performance and privatisation of transition banks have been widely studied already, little is known about their risk-taking and risk management activities. We use a new European Bank for Reconstruction and Development (EBRD) survey data set of banks to examine risk taking by banks...

This paper explores how the legal environment affects bank behavior in 20 transition economies. Based on a newly constructed data set we find that banks' loan portfolio composition depends on the legal environment. If banks operate in a well-functioning legal environment they lend relatively...

Model-based capital regulation is considered to be one of the key innovations of Basel II. The objective of this innovation was to make capital charges more sensitive to risk. Using data from the German credit register, and employing a difference-indifference identification strategy, we...

In this paper, we investigate how the introduction of complex, model-based capital regulation affected credit risk of financial institutions. Model-based regulation was meant to enhance the stability of the financial sector by making capital charges more sensitive to risk. Exploiting the...