As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Stefan Avdjiev, Adviser for Financial Stability at the BIS Monetary and Economic Department.
He will present his paper Regulatory capital, market capital and risk taking in international bank lending, coauthored with José María Serena Garralda.
Abstract: We investigate the links among US monetary policy, bank capital, and risk taking in international bank lending. Using syndicated loan data, we find that low US interest rates spur the origination of risky dollar-denominated international loans through two distinct mechanisms. First, consistent with the existence of a regulatory capital channel, banks with higher levels of regulatory capital originate riskier loans when interest rates decline. Second, banks with low levels of market capital have a higher propensity to extend riskier loans in response to falling interest rates. This finding implies the existence of a market capital channel, which operates in the opposite direction to the regulatory capital channel.
About the speaker
Stefan Avdjiev joined the BIS in 2009, immediately after the completion of his PhD in economics. Prior to assuming his current position, he worked as an Economist in the Financial Institutions and the Financial Markets groups of the BIS Monetary and Economic Department (between 2009 and 2014) and as the Deputy Head of International Banking and Financial Statistics (between 2014 and 2020). His recent research has been mainly focused on issues related to financial stability and international finance. He has also conducted and published research in macroeconomics and asset pricing.