Banks in Space: Does Distance Really Affect Cross-Border Banking?

During the last years, gravity equations have leapt from the trade literature over into the literature on financial markets. Martin and Rey (2004) were the first to provide a theoretical model for cross-border asset trade, yielding a structural gravity equation that could be tested empirically. In this paper, I use a gravity model to evaluate factors that affect cross-border banking. Furthermore, I extend the baseline model to allow for third-country effects, which have been shown to matter for international trade, using spatial econometric techniques. I try to answer the following question: First, is there a spatial dimension in cross-border banking? Second, if so, has it changed over time, and third, what happens if this spatial dimension is ignored? I use bilateral data on cross-border banking assets for 15 countries, and I estimate cross-section regressions for each year. I find strong evidence for a spatial dimension in cross-border banking. Furthermore, the direct effect of distance decreases significantly when applying spatial econometric techniques.

Shocks at large banks and banking sector distress: the Banking Granular Residual

Size matters in banking. In this paper, we explore whether shocks originating at large banks affect the probability of distress of smaller banks and thus the stability of the banking system. Our analysis proceeds in two steps. In a first step, we follow Gabaix (2008a) and construct a measure of idiosyncratic shocks at large banks, the so-called Banking Granular Residual. This measure documents the importance of size effects for the German banking system. In a second step, we incorporate this measure of idiosyncratic shocks at large banks into an integrated stress-testing model for the German banking system following De Graeve et al. (2007). We find that positive shocks at large banks reduce the probability of distress of small banks. --Banking sector distress,size effects,shock propagation,Granular Residual

Reduced cross-border lending and financing costs of SMEs

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010 - 2014. We find that the decline in cross-border lending led to a deterioration in the borrowing conditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms’ external financing costs increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders

Don't stop me now: the impact of credit market fragmentation on firms' financing constraints

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010 - 2014. We find that the decline in cross-border lending led to a deterioration in the borrowing conditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms’ external financing costs has increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders

External financial dependence and firms' crisis performance across Europe

Economic research has often relied on a measure of external financial dependence that is constructed using U.S. data and applied to other countries under the assumption of a stable industry ranking across countries. We exploit unique survey data from seven European countries to show that correlations of financial dependence across countries are weak, questioning this assumption. We then use the novel survey-based measure to show that the global financial crisis had a disproportionately negative impact on the real performance of financially dependent firms

Changing forces of gravity: how the crisis affected international banking

The global financial crisis has brought to an end a rather unprecedented period of banks’ international expansion. We analyze the effects of the crisis on international banking. Using a detailed dataset on the international assets of all German banks with foreign affiliates for the years 2002-2011, we study bank internationalization before and during the crisis. Our data allow analyzing not only the international assets of the banks’ headquarters but also of their foreign affiliates. We show that banks have lowered their international assets, both along the extensive and the intensive margin. This withdrawal from foreign markets is the result of changing market conditions, of policy interventions, and of a weakly increasing sensitivity of banks to financial frictions

Untersuchung zur Rolle von Syndecan-4 in der Zytokin-abhängigen Knorpeldestruktion durch synoviale Fibroblasten bei der Rheumatoiden Arthritis:Untersuchung zur Rolle von Syndecan-4 in der Zytokin- abhängigen Knorpeldestruktion durch synoviale Fibroblasten bei der Rheumatoiden Arthritis

In der Dissertation untersuchte ich die Rolle des Heparansulfat Proteoglykans Syndecan-4 in der Zytokin- abhängigen Knorpeldestruktion durch synoviale Fibroblasten bei der Rheumatoiden Arthritis. Zum ersten Mal konnte eine krankheitsspezifische Hochregulation von Syndecan-4 sowohl in vitro als auch in vivo gezeigt und der damit verbundene Mechanismus der Zytokin- abhängigen Signaltransduktion aufgeklärt werden. Zusätzlich konnte eine Verstärkung der pro-inflammatorischen Signale durch Syndecan-4 bei der entzündlichen Knorpelzerstörung nachgewiesen werden. Somit konnte ich in meiner Arbeit zeigen, dass Syndecan-4 ein neues und interessantes Target bei der Aktivierung von Fibroblasten und der Matrixzerstörung bei der Arthritis und anderen entzündlichen Erkrankungen darstellt

External Financial Dependence and Firms' Crisis Performance Across Europe

How do financial market conditions affect real economic performance? Empirical investigations of this question have often relied on measures of external financial dependence (EFD) that are constructed using U.S. data and applied to other countries under the assumption of a stable industry ranking across countries. This paper exploits unique, comparable survey data from seven European countries to show that correlations of EFD across countries are weak, casting some doubt on this assumption. We then use the novel survey-based EFD index to show that the global financial crisis had a disproportionately negative impact on the real performance of financially dependent firms. Further investigations highlight the importance of supply chains in propagating the credit shock

Europe’s proposed capital markets union: how disruptive technologies will drive investment and innovation

An EU capital markets union (CMU) has been proposed with the aim of revitalising Europe’s economy by creating efficient funding channels between providers of loanable funds and the firms best placed to use them. Jon Danielsson, Eva Micheler, Katja Neugebauer, Andreas Uthemann and Jean-Pierre Zigrand argue that a successful capital markets union would deliver investment, innovation and growth, but would rely on overcoming difficult regulatory challenges. They note that if it were successfully implemented, the proposed CMU could also change the nature of systemic risk in Europe

What drives bank coverage ratios? Evidence from Europe

We analyse micro and macro drivers of coverage ratios, as well as of their components, in a cross-country sample of European banks. Among the former, we find that credit risk variables, including forward-looking indicators, are the most relevant bank-specific factors explaining bank coverage ratios, together with the level of capitalization in high-NPL banks. Among the latter, coverage ratios increase with GDP growth, suggesting they behave countercyclically, more stringent macro-prudential policies, and deeper NPL secondary markets. Finally, we find evidence of peer imitation behaviour in banks with coverage ratios below the country average.JRC.B.1-Finance and Econom