Flooded through the Back Door: The Role of Bank Capital in Local Shock Spillovers

Bank lending networks and the propagation of natural disasters

“…(2016) show that banks act as propagators of shale gas and oil booms, while Cortés and Strahan (2017) document that banks propagate natural disasters shocks in the mortgage market. Rehbein and Ongena (2020) show that in the aftermath of the 2013 flood in Central Europe, German banks significantly reduced lending to small firms in unaffected areas in Germany leading to reductions in lending, employment, and asset growth. Acemoglu et al.…”

The Impact of Natural Disasters on Banks' Impairment Flow: Evidence from Germany

“…While their results do not suggest that the expansion in lending is associated with higher credit risk or rent skimming, our study provides empirical evidence on multiple credit risk channels affecting banks' profitability. Rehbein and Ongena (2020) who also study the effects of the 2013 flood in Germany find evidence for local spillovers from weakly capitalized banks affected by the flood to firms located in unaffected areas through a reduction in lending.…”

Banking on Snow: Bank Capital, Risk, and Employment

“…finds that, among a ected counties, those with a larger share of independent banks and more bank capital saw more positive employment growth. Rehbein and Ongena (2020) also report e ects of bank capitalization on employment while analyzing spillovers of local shocks to una ected regions. They use data on a natural disaster in Germany to show that credit demand shocks caused by the disaster a ect banks' credit supply in non-shocked regions, and that this e ect is driven by banks lacking equity capital.…”

“…The disaster is a flood a ecting many German regions in the year 2013 Rehbein and Ongena (2020). build on prior research byKoetter et al (2020) who analyze the response of bank lending to the disaster with a focus on the shocked regions.…”