In my new working paper “Repo Market Functioning: The Role of Capital Regulation”, Antonis Kotidis and I show that a tightening of the leverage ratio in the UK reduced repo market liquidity, especially affecting smaller end users such as banks, insurers, pension funds and asset managers. We also show that other foreign dealers not affected by the tightening stepped into the market and gained market share, effectively benefitting from tighter UK regulation.

My paper “When Arm’s Length is too Far: Relationship Banking over the Credit Cycle” written jointly with Thorsten Beck, Hans Degryse and Ralph de Haas has been accepted for the Journal of Financial Economics. Using data from 21 countries in central and eastern Europe we show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.

My paper “Exporting Sovereign Stress: Evidence from Syndicated Bank Lending during the Euro Area Sovereign Debt Crisis”, written together with Alex Popov won the 2016 Pagano-Zechner price for the best non-investment paper in the Review of Finance. In this paper we show that tensions in Eurozone government-bond markets were transmitted internationally through the bank lending channel. Lending by European banks with sizeable exposures to sovereign debt from the troubled Eurozone countries became impaired after the start of the crisis. This resulted in a reallocation away from foreign markets except the US and an increase in home bias.