Alberto Martin

Mr.Giovanni Dell'Ariccia

Alex Popov

Nigel Jenkinson

Mr.Luc Laeven

Caio Ferreira

Ms.Camelia Minoiu

This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Managing the Sovereign-Bank Nexus

Dalida Kadyrzhanova

Mr.Lev Ratnovski

We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms use less tangible capital and invest more in intangible assets. We show that, as firms shift toward intangible assets that have lower collateral values, banks reallocate their portfolios away from commercial loans toward other assets, primarily residential real estate loans and liquid assets. This effect is more pronounced for large and less well capitalized banks and is robust to controlling for real estate loan demand. Our results suggest that increased firm investment in intangible assets can explain up to 20% of bank portfolio reallocation from commercial to residential lending over the last four decades.

Bank Lending in the Knowledge Economy

Ms.Camelia Minoiu

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