Eurozone banks increase illiquid assets after solvency shocks – DNB paper

Eurozone banks tend to increase their holdings of less liquid assets in response to negative solvency shocks, a working paper published by the Netherlands Bank finds.

In How banks respond to distress: shifting risks in Europe’s banking union, Mark Mink, Rodney Ramcharan and Iman van Lelyveld use a confidential dataset on eurozone lenders’ bond holdings. They combine this with data from the European Central Bank on the balance sheets of different eurozone countries’ banking systems.

They then