Research seminar: Eddie Gerba (Bank of England)

We would like to invite you to a research seminar by Eddie Gerba, Head of Research for the Prudential Regulation Authority, Bank of England.

Title: Who's The Boss? The Role of Shareholders in Banks' Lending Decisions

Authors: Petros Katsoulis (Bank of England), Eddie Gerba (Bank of England; LSE), Jozef Baruník (IES), Jonathan Acosta-Smith (OECD)
Abstract: We investigate banks' lending decisions in the face of shareholder pressure to make payouts. We exploit the regulatory ban on banks' distributions during the Covid-19 pandemic to show that the conflict between the interests of banks' shareholders and their borrowers can persist even with such a ban. First, we find that restricted banks faced an increase in shareholders' required rate of return, which was even higher for the banks most exposed to income-oriented investors. This led to an increase in the required rate of return on their overall capital. Second, banks responded by increasing lending volumes only to medium-sized and larger firms and on smaller loans, which are less capital intensive. However, they utilised government guarantee schemes to increase lending volumes to smaller firms and on larger loans. The results suggest that distribution restrictions can incentivise banks to increase lending, but in a way that minimises the capital impact to appease shareholders.

The seminar will take place on Monday, December 2, in Room 206 at 11:00.

The paper is available at: https://dx.doi.org/10.2139/ssrn.4972832

We invite, in particular, PhD students to take the opportunity to get familiar with the state-of-the-art research; their attendance counts equivalently as attendance at dissertation defenses. We also invite faculty members and PhD students to discuss their own research with the speaker. If you need a discussion slot with the speaker, please write to Jozef Baruník, and he will try to find a suitable time. 

The list of all research seminars at IES (past and forthcoming) is available at: https://ies.fsv.cuni.cz/en/research/research-seminars