Conference Agenda

We examine whether divergence in green transparency policies (GTP) induces cross-border regulatory arbitrage by global banks and undermines the effectiveness of transparency-based climate regulation. Using a new country-year index of GTP stringency and a bank–host panel of 693 banks across 118 host countries from 2010 to 2023, we show that tighter home-country GTPs push banks to increase foreign brown exposure in less stringent jurisdictions through both majority- and minority-owned affiliates. The minority-stake channel is strongest for banks with high environmental scores, consistent with hidden arbitrage. Finally, a stronger institutional environment does not eliminate this arbitrage response under tighter GTP rules.

Financial technology (Fintech) innovation in banking has the potential to improve banks’ screening and monitoring abilities, especially for more opaque firms, thereby improving their portfolio and risk allocation. We test the impact of Fintech innovation in borrower monitoring on banks’ supply of credit to Italian firms, with a special focus on small innovative businesses. To this end, we use Credit Register data on outstanding loans for Italy at the bank-firm level, combined with information on bank Fintech innovation from the Bank of Italy’s Regional Bank Lending Survey, and the classification of innovative young firms under the Italian Start-up Act. We find that banks investing in Fintech-based monitoring technologies provide larger volumes of credit to innovative firms at lower interest rates. Moreover, firms borrowing from these banks seem to benefit from stronger relationships, as they are less likely to exit the credit market. Finally, we find no evidence that Fintech innovation in monitoring increases the likelihood of loans to innovative firms becoming non-performing.

We test whether bank capital is endogenous in the short run by studying how banks manage Common Equity Tier 1 (CET1) capital over six months, including during bank-specific distress. Using semi-annual data on 172 banks across 26 countries from the Basel Committee’s Quantitative Impact Study (2013-2019), we first estimate bank-specific target capital-asset ratios via partial adjustment model and then employ simultaneous-equations models to analyse the joint determination of management action on capital and Risk-Weighted Asset (RWA) growth. We find that banks actively adjust CET1 capital in the short run, that management action on capital is systematically and positively associated with RWA growth, and that bank-specific distress does not prevent such adjustment. The findings challenge the widespread assumption that bank capital is exogenous in the short run and have implications for the evaluation of capital requirements and the modelling of second-round effects in stress testing.

We study how nature-related financial policies in the jurisdictions from which global banks operate affect the terms of cross-border credit to firms with a biodiversity damage footprint. Combining granular loan-level data for Colombia - a ``megadiverse country'' - with regional biodiversity loss and a novel index capturing nature-related financial policies worldwide, we find that stricter policies lead to higher interest rate spreads and longer loan maturities, with no change in credit volumes. These effects are stronger for disclosure-based and principles-based policies and economically meaningful in magnitude. Our results provide first evidence on the cross-border pricing of biodiversity-related risk in loans and highlight how banks adjust international lending when operating under stricter nature-related policy regimes.