Template-Type: ReDIF-Paper 1.0
Author-Name: Stefan Avdjiev
Author-X-Name-First: Stefan 
Author-X-Name-Last: Avdjiev  
Author-Name: Maximilian Jager
Author-X-Name-First: Maximilian 
Author-X-Name-Last: Jager
Title: Bank opacity - patterns and implications
Abstract: We investigate the patterns and implications of bank opacity in Europe using a rich bank-level data set. Employing a novel event study methodology, we document that public data releases by the European Banking Authority (EBA) on banks' exposures to individual countries and sectors contained information that was not previously priced by equity and CDS markets. We demonstrate that the degree of bank opacity varied considerably across bank nationalities and counterparty sectors – it was highest for European periphery banks' sovereign exposures and European core banks' private sector exposures. Furthermore, we document that underestimations of banks' credit risk by markets were associated with lower funding costs and higher wholesale borrowing (for all banks) as well as with greater risk taking and higher profitability (for European periphery banks).
Length: 48 pages
Creation-Date: 2022-01
File-URL: https://www.bis.org/publ/work992.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work992.htm
File-Format: text/html
Number: 992
Keywords: bank opacity, asymmetric information, event study, credit risk, asset markets.
Classification-JEL: F34, G21, G28.
Handle: RePEc:bis:biswps:992