Using bank loans as collateral in Europe: The role of liquidity and funding purposes. National Bank of Belgium Working Paper No. 318

We show that illiquid assets such as bank loans are used by euro area banks both as central bank collateral for short-term liquidity insurance purposes and for longer-term funding purposes for issuing covered bonds or asset-backed securities. We then explore the determinants of the choice of using bank loans for short-term liquidity insurance purposes or long-term funding purposes focusing on the case of Belgian banks. We find that (1) loan types are key to alleviating asymmetries of information; (2) regulatory requirements play a major role in the choices of banks, both directly and indirectly through clientele effects and (3) there are significant switching costs between the various uses of bank loans as collateral so historical decisions also determine the use of bank loans as collateral

COVID-19 and the Mortgage Market in Luxembourg

peer reviewedWith a ratio of household debt to gross disposable income above 150%, households in Luxembourg are among the most indebted in Europe. A high level of debt exacerbates the sensitivity of household net worth to changes in house prices, which can increase the severity of economic downturns. In this note, we evaluate the implications of the COVID-19 crisis for the mortgage market in Luxembourg using data on the labour market and government interventions, as well as surveys of consumer finances (HFCS). Our conclusions are twofold. At the aggregate level, the Luxembourg mortgage market is relatively well placed to weather the shock, because a large share of residents work in sectors that are less affected by the crisis such as the financial or government sectors. However, our analysis of micro-level survey data suggests that some segments of the population may be financially vulnerable to the COVID-19 shock

Bank Competition and Bargaining over Refinancing

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The Effect of Environmental Preferences on Investor Responses to ESG Disclosure

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The Effect of Environmental Preferences on Investor Responses to ESG Disclosure

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Low Interest Rates and the Distribution of Household Debt

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Tax Subsidies and Housing Affordability

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Tax Subsidies and Housing Affordability

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Bank Competition and Bargaining over Refinancing

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