000			01253nam a22001457a 4500
999			_c523666 _d523666
008			230918b ||||| |||| 00| 0 eng d
100			_aBlattner, L., Farinha, L. and Rebelo, F. _943761
245			_aWhen losses turn into loans: The cost of weak banks
260			_aThe American Economic Review
300			_a113(6), Jun, 2023: p.1600-1641
520			_aWe provide evidence that banks distort the composition of credit supply in order to comply with ratio-based capital requirements in times of economic distress. An unexpected intervention by the European Banking Authority provides a natural experiment to study how banks respond to falling below minimum required capital ratios during an economic downturn. We show that affected banks respond by cutting lending but also by reallocating credit to distressed firms with underreported loan losses. We develop a method to detect underreported losses using loan-level data. The credit reallocation leads to a reallocation of inputs across firms. We calculate that the resulting increase in input misallocation accounts for about 22 percent of the decline in productivity in Portugal in 2012.- Reproduced
773			_aThe American Economic Review
906			_aBANKING AND FINANCE
942			_cAR