The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.
December 12th, 2018, 11:00-12:15, D4.4.008
Paul Pelzl, Tinbergen Institute and Vrije Universiteit Amsterdam
Title: "Capital Regulations and Credit Line Management during Crisis Times"
Credit line drawdowns by firms reduce a bank's regulatory capital ratio. Using the Austrian Credit Register we provide novel evidence that during the 2008-09 financial crisis, banks with a distressed capital position managed this concern by substantially cutting little-used credit lines. Controlling for a bank's capital position, we also find that greater liquidity problems induced banks to considerably cut little-used credit lines over 2008-09. These results suggest that banks actively manage both capital and liquidity risk caused by undrawn credit lines in periods of financial distress, but thereby reduce liquidity provision to firms exactly when they need it most.