Author(s): Isabella Mueller, Eleonora Sfrappini Date: June 2022 Abstract: We identify the effect of climate change-related regulatory risks on credit reallocation. Our evidence suggests that effects depend borrower’s region. Following an increase in salience of regulatory risks, banks reallocate credit to US firms that could be negatively impacted by regulatory interventions. Conversely, in Europe, banks[…]

Author(s): William F. Bassett and David E. Rappoport Date: May 2022 Abstract: The use of stress testing for macroprudential objectives is advanced by modeling spillovers within the financial sector or between the real and financial sectors. In this chapter, we discuss several macroprudential elements that capture these spillovers and how they might be added to[…]

Author(s): Priyank Gandhi and Amiyatosh Purnanandam Date: June 2022 Abstract: We show that the U.S. commercial banks have become increasingly similar in their risk exposure after the global financial crisis. Pairwise correlation in bank equity returns increased threefold after the enactment of annual stress tests under the Dodd-Frank Act (DFA). Non-financials and non-bank financial firms[…]

Author(s): Antonis Kotidis and Stacey L. Schreft Date: May 2022 Abstract: This paper studies the effects of a unique multi-day cyberattack on a technology service provider (TSP). Using several confidential daily datasets, we identify and quantify first- and second-round effects of the event. For banks using relevant services of the TSP, the attack impaired their[…]

Author(s): Zafer Kanik Date: May 2022 Abstract: This paper revisits financial networks in a model of counterparty exposures, mandatory bail-ins and complementary bailouts. Under mandatory bail-ins, the network’s role is reshaped and beyond its previous contagion-related role, because counterparty obligations, in the first place, are used for bail-ins against idiosyncratic failures. Di- versification faces a[…]