Well, more than a month after saying that I was back… well, I am. And my post for the Bank Underground blog (the blog of the Bank of England staff) is finally out. But the really great thing is that, while reading Matt Levine’s Bloomberg column—as I do every day—I realised that he mentioned our post! How
cool great is that!
What is the post about? Here it is the first paragraph:
What are the consequences of proprietary trading? Banks typically hold and trade a significant amount of securities, and during the financial crisis, many of these securities suffered strong price declines. How did banks react? This is precisely what we investigate for the case of Germany in a recently published paper. We find that some banks increased their investments in securities, especially for those securities that suffered price drops. This strategy delivered high returns; but at the same time, these banks pulled back on lending to the real economy, since during the financial crisis they could not easily raise new (long-term) funding. Our findings suggest that proprietary trading during a crisis can lead to less lending to the real sector.