Abstract
Purpose: This study examines whether and how participation in the COVID-19 debt moratoria program impacted the transparency of Eurozone-listed banks. By suspend- ing loan repayments and routine borrower monitoring ‒ while prompting discretion- ary disclosures on moratoria exposures ‒ the program introduced opposing forces on transparency. Design/methodology/approach: We analyse a sample of Eurozone-listed banks from 2018 to 2022. We identified banks holding portfolios with loans that adhere to (or do not adhere to) debt moratoria. First, we employ a difference-in-difference ap- proach to estimate the effects of adopting the debt moratoria program on transparency. Then, we run a set of OLS panel regressions to examine how the composition of the loan portfolio affects transparency. Findings: We show that banks exposed to a larger volume of loans subject to debt moratoria experienced a reduction in transparency. Furthermore, we find that the impact on transparency is not uniform across banks but varies with loan portfolio composition. Banks with a higher share of corporate loans tend to exhibit a less pro- nounced decline in transparency, suggesting that lending practices influence how banks adjust their disclosure behaviour in response to regulatory interventions. Originality/value: This study sheds light on the unintended consequences of regu- latory interventions during crises. While debt moratoria helped banks manage the risks associated with non-performing loans, they also came at the cost of reduced transparency. These findings suggest that regulators should carefully consider the potential trade-offs between transparency and other objectives when crafting crisis- response measures.
Keywords:transparency, COVID-19 debt moratoria, Eurozone-listed banks
