Regulations gave eurozone banks incentives to downplay credit risks, paper argues

bank-of-slovenia
The Bank of Slovenia

Banking regulations in the eurozone before the creation of the Single Supervisory Mechanism provided incentives for banks to downplay corporate borrowers' credit risks, a working paper published by the Bank of Slovenia argues.

In Discretionary credit rating and bank stability in a financial crisis, Arjana Brezigar-Masten, Igor Masten and Matjaž Volk study the incentives facing commercial banks carrying out discretionary credit risk assessments.

The authors use data relating to the credit ratings

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