Empirical Economics

, Volume 45, Issue 3, pp 1251–1266

Is the leverage of European banks procyclical?

  • A. Baglioni
  • E. Beccalli
  • A. Boitani
  • A. Monticini
Article

Abstract

Detecting whether banks’ leverage is indeed procyclical is relevant to support the view that booms and crises may be reinforced by some sort of supply side financial accelerator, whilst finding a plausible explanation of banks’ behaviour is crucial to trace the road for a sensible reform of financial regulation and managers’ incentives. By analyzing a large sample of European banks, we show that procyclical leverage appears to be well entrenched in the behaviour of those banks for which investment banking prevails over the traditional commercial banking activity.

Keywords

Banks Procyclicality Financial regulation Leverage 

JEL Classification

G21 E3 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  • A. Baglioni
    • 1
  • E. Beccalli
    • 1
  • A. Boitani
    • 1
  • A. Monticini
    • 1
  1. 1.Catholic University of MilanMilanItaly

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