How susceptible to contagion are bank deposits associated with financial inclusion? To assess this susceptibility, we analyze the behavior of deposits around three significant events of bank failure in the Philippines. We conduct the event studies with the advantage of a unique dataset that disaggregates deposits by size at the town level. We show that both small and large deposits are withdrawn up to 4–5 quarters before the bank’s closure. We take advantage of this distinction between small and large deposits to test for contagion. Applying difference-in-difference regressions, we find evidence of contagion: the closure of a large bank leads to withdrawals at banks in neighboring towns by depositors both large and small. This is the case for two of the three events, and when the data is taken collectively. That there is a market for information affects deposit insurance as a safety net for depositors and as a disciplining tool for banks. There are also liquidity considerations that banks need to consider. In any case, we consistently find the behavior of small depositors to be no different from that of large depositors. Hence, if financial inclusion is about access to bank deposits, it is not likely to heighten systemic risks nor mitigate them.

We exploit staggered real estate transaction tax (RETT) hikes across German states to identify the effect on the growth rates of regional house prices and outstanding mortgage loans by all local German banks. The results show that a RETT hike by one percentage point reduces regional house prices by 3%–4%. Furthermore, IV-regressions yield that a 1 percentage point drop in regional house prices induced by a RETT increase leads to a 0.3% decline in regional mortgage lending, particularly among low-capitalized banks in rural regions.

This study presents a methodology for analyzing procyclical systemic risk arising from joint monetary and prudential policy decisions. We analyze the impact of different scenarios of the monetary policy interest rate on the leverage ratio of US commercial banks. The Dynamic Conditional Correlation - Semi-nonparametric model and bivariate spectral analysis are applied to model the dynamics among the variables. The results indicate that high and low interest rates increase leverage while medium rates reduce it. The importance of considering asymmetries and heavy tails of probability distributions in stress tests and the dynamics of the correlation between variables is highlighted when assessing financial stability.

We examine the impact of the ECB’s asset purchase programmes on euro area non-financial firms’ cost of borrowing and their choice between corporate bonds and syndicated loans. Our findings indicate that the Corporate Sector Purchase Programme (CSPP) reduced spreads for both eligible and non-eligible corporate bonds, and that ECB purchases of covered bonds positively affected corporate bond spreads. The CSPP also compressed spreads across all syndicated loans, irrespective of eligibility. We find evidence supporting a “cost of borrowing channel” for covered bonds under the first programme and asset-backed securities, indicating that syndicated loan spreads reflect banks’ borrowing costs in the bond market. Additionally, our results reveal that the CSPP significantly influenced firms’ debt financing choices, with these effects being more pronounced for non-switchers.