We present the first empirical study of loan searching strategies and loan granting decisions in a context where banks observe whether applicants have unsuccessfully applied for credit to other lenders in the past. Our identification strategy benefits from the use of granular data on loan applications and exploits the fact that evaluating lenders observe only the rejections received by a borrower up to six months before the current application. We document that past rejections diminish the probability of approval and increase the probability that a loan search is interrupted.

An important element of the macro-prudential analysis is the study of the link between business cycle fluctuations and banking sector profitability and how this link is affected by institutional and structural characteristics. This work estimates a set of equations for net interest income, non-interest income, operating costs, provisions, and profit before taxes, for banks in the main industrialized countries and evaluates the effects on banking profitability of shocks to both macroeconomic and financial factors. Distinguishing mainly the euro area from Anglo-Saxon countries, the analysis also identifies differences in the resilience of the respective banking systems and relates them to the characteristics of their financial structure.

The European Central Bank's large-scale asset purchase program targeted safe assets, but also aimed to impact prices of risky assets. The mechanism for this is the “portfolio rebalancing channel”, where financial institutions’ portfolio decisions impact financial prices more broadly. We examine this mechanism using cross-sectional heterogeneity in how the financial portfolios of different sectors of the European economy were affected around the purchase program. We find evidence of rebalancing. In vulnerable countries, where macroeconomic unbalances and relatively high risk premia remained, we document rebalancing towards riskier securities. In less vulnerable countries, based on granular information for large European banks, we document rebalancing toward bank loans.

This paper investigates how banks’ activity is affected by the corporate income tax. For this purpose it uses aggregate data on all main components of the profit and loss account and on the interest rate applied on loans and on deposits for the banking sector of the main industrialized countries during the period 1981–2003. With such information we are able to disentangle the extent to which a bank is able to shift its tax-burden forward to its borrowers, depositors, and purchasers of fee-generating services. The main result is that the taxation of banks’ profit is equivalent to a taxation on loans and as such it exerts a substantial impact on the composition of banking sector revenues. However credit intermediaries have the ability to shift a substantial part of their corporate income tax burden and therefore differences in the level of taxation cannot explain the dispersion observed in banks’ net profitability across industrialized countries.

We examine the implications of the sovereign debt tensions on the Italian credit market by estimating the effect of the 10-year BTP-Bund spread on a wide array of bank interest rates, categories of loans and income statement variables. We exploit the heterogeneity between large and small intermediaries to assess to what extent the transmission of sovereign risk differed in relation with different banks’ balance-sheet characteristics and business strategies. Regarding the cost of funding, we find that changes in the BTP-Bund spread have a sizeable effect on the interest rates on term deposits and newly issued bonds but virtually no effect on overnight deposits. Furthermore, the sovereign spread significantly affects the cost of credit for firms and households and exerts a negative effect on loan growth. All these results are magnified when considering alone the five largest banks, which are typically less capitalized, have a larger funding gap and incidence of bad loans and rely more on non-traditional banking activities. Sovereign tensions also affect the main items of banks’ income statement.