Banks can exploit imperfectly informed investors – BIS paper
Some banks gain additional funding from investors who underestimate their credit risk, analysts find
Investors are not always fully informed about banks’ lending portfolios, allowing some lenders to gain extra funding and take larger risks, research published by the Bank for International Settlements finds.
In the working paper, Stefan Avdjiev and Maximilian Jager analyse a dataset on the exposures of 130 European banks from 2012 to 2018.
They observe that public information releases by the European Banking Authority had a “significant impact” on banks’ credit default swap spreads and equity
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