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The effects of supervisory stress testing on bank lending: examining large UK banks

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posted on 2022-05-09, 13:47 authored by Kasim Ahmed, Giovanni Calice

In this paper, we study the effects of supervisory stress test exercises on 19 UK banks over the 2005–2018 period. The novelty of our approach is that we include two stress testing timelines from two banking supervisory authorities. Using a difference-in-difference methodology, in a first step, we analyse the effects of the Bank of England’s stress tests on the lending behaviour of large UK banks. In a second step, for robustness, we also examine the stress tests administered by the European Banking Authority. Our main result is that banks that failed the stress tests reduced lending. Additionally, we show that the effectiveness of the stress tests exercises remained unchanged throughout the period.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Banking Regulation

Volume

24

Issue

2

Pages

228-247

Publisher

Palgrave Macmillan (part of Springer Nature)

Version

  • AM (Accepted Manuscript)

Rights holder

© The Author(s), under exclusive licence to Springer Nature Limited

Publisher statement

This is a post-peer-review, pre-copyedit version of an article published in Journal of Banking Regulation. The definitive publisher-authenticated version Ahmed, K., Calice, G. The effects of supervisory stress testing on bank lending: examining large UK banks. J Bank Regul 24, 228–247 (2023). https://doi.org/10.1057/s41261-022-00195-3 is available online at: https://doi.org/10.1057/s41261-022-00195-3

Acceptance date

2022-02-13

Publication date

2022-04-15

Copyright date

2022

ISSN

1745-6452

eISSN

1750-2071

Language

  • en

Depositor

Dr Giovanni Calice. Deposit date: 17 April 2022

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