We study heterogeneity in households' credit across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia) during 2022-24 using granular credit register data. We first document substantial between- and within-country variation in mortgage and consumer lending by borrower age, loan maturity, and interest rate fixation. We then quantify the pass-through of the ECB's recent tightening cycle to household borrowing costs, and assess its heterogeneous impact across households. Pass-through is nearly complete for mortgages (around 0.9) but considerably weaker for consumer credit (around 0.4). While mortgage pass-through is relatively homogeneous across countries, consumer credit shows pronounced cross-country differences that cannot be explained by borrower or loan characteristics. Younger households face stronger mortgage pass-through but weaker consumer credit pass-through relative to older borrowers, and longer maturities are associated with stronger pass-through in both credit markets.
This paper contributes to a better understanding of the drivers of electoral support for Green parties and the environmental actions they promote, which is crucial for ensuring the long-term feasibility of environmental policies. We examine whether individual environmental preferences translate into voting for Green parties and analyze the mechanisms behind this effect. Employing an individual-level survey from developed and developing economies matched with the political parties' programs globally, we find that individuals who prefer environmental protection over economic growth are likely to translate their preferences into voting and supporting Green parties. These findings are robust to alternative definitions of Green parties and environmental preferences, as well as to potential endogeneity concerns. The key mechanisms behind this relationship are changes in the stringency of environmental regulations, individual economic insecurity, and individual- and country-level exposure to environmental changes. The effect of environmental preferences on Green party voting is less pronounced among individuals living in rural areas and those who are economically disadvantaged, including those with lower levels of education and income. These results suggest that support for Green parties and environmental policies is contingent on voters' economic security, even when environmental preferences are strong.
Climate change is expected to increase the frequency and intensity of extreme weather events, such as floods and droughts, thereby amplifying physical risks. In this paper, we assess the direct exposure of Slovak banks' corporate loan portfolios to riverine flood risk. We propose a set of monitoring metrics and estimate exposures at risk from river flooding. Our analysis draws on a comprehensive dataset that integrates flood-risk maps from the European Commission's Joint Research Centre, cadastral data on firms' properties, credit register data, and firms' financial statements. Although a substantial share of firms is located in flood-prone areas, only a subset is likely to experience flood levels exceeding critical thresholds. Consequently, the direct impact of riverine flooding on corporate credit risk appears relatively moderate-estimated to increase exposure at default by 2 to 10 basis points of the corporate loan portfolio under standard scenarios, assuming flood-induced sales losses, and up to 50-60 basis points under more conservative stress scenarios, which additionally account for declines in asset values. Under counterfactual scenarios assuming a fivefold increase in flood frequency, the estimated increase exceeds one percentage point of the loan portfolio.
When default losses elevate borrowing costs, expanding credit cannot stabilize the economy because default rates feed back to lending rates through bank balance sheets. Asset management companies (AMCs) break this loop by purchasing nonperforming loans at their long-run recovery values, thereby fixing the effective default rate that banks face. Government purchases of performing loans expand credit but leave this feedback intact. In a model calibrated to the eurozone, the AMC reduces quarterly default rates by 0.8 percentage points, lowers lending rates by 1.6 percentage points, and raises welfare by 0.2%. Government purchases crowd out bank deposits, contracting credit; default rates rise by 1.8 percentage points, lending rates increase by 1.2 percentage points, and welfare falls by 0.3%.
Rapid FinTech development is reshaping global financial systems, yet the understanding of its implications for the level of risk undertaken by banks remains ambiguous. This study examines the relationship between FinTech development and credit risk in the banking sector across 63 countries from 2013 to 2021. We distinguish between bank-based and market-based financial system structures, as well as between financially developed and underdeveloped economies within these two structures. Furthermore, we employ spatial models to account for cross-border spillovers in bank risk and adopt a novel measure of FinTech development that is based on FinTech investment activities. Our findings first reveal the existence of positive spatial dependence in bank credit risk across countries, highlighting the necessity of spatial analysis. Second, using the Spatial Durbin Model, which provides the best fit for our data, we show that FinTech development reduces bank credit risk both domestically and internationally. Third, such credit risk-mitigating effect of FinTech is concentrated in bank-based financial systems, whereas it is absent in market-based structures. Fourth, within bank-based economics, this effect is more pronounced in financially underdeveloped countries compared with those with well-developed financial markets. Finally, our robustness checks support these findings. This paper highlights FinTech’s potential in mitigating bank credit risk and underscores the importance of considering financial structures and spatial interdependence in assessing bank risk.
