Eurozone banks increase illiquid assets after solvency shocks – DNB paper

Shift in asset holdings could create asset price distortions after banking crises, researchers say

Europe flags

Eurozone banks tend to increase their holdings of less liquid assets in response to negative solvency shocks, a working paper published by the Netherlands Bank finds.

In How banks respond to distress: shifting risks in Europe’s banking union, Mark Mink, Rodney Ramcharan and Iman van Lelyveld use a confidential dataset on eurozone lenders’ bond holdings. They combine this with data from the European Central Bank on the balance sheets of different eurozone countries’ banking systems.

They then

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