AbstractWe analyze securities trading by banks and the associated spillovers to the supply of credit. Empirical analysis has been elusive due to the lack of securities register for banks. We use a unique, proprietary dataset that has the investments of banks at the security level for 2005-2012 in conjunction with the credit register from Germany. Analyzing data at the security level for each bank in each period, we find that during the crisis, banks with higher trading expertise increase their overall investments in securities, especially in those that had a larger price drop. The quantitative effects are largest for trading-expertise banks with higher capital and in securities with lower rating and long-term maturity. In fact, there are no differential effects for triple-A rated securities. Moreover, banks with higher trading expertise reduce their overall supply of credit in crisis times – i.e., for the same borrower at the same time, trading-expertise banks reduce lending relative to other banks. This effect is more pronounced for trading-expertise banks with higher capital, and the credit reduction is binding at the firm level. Finally, these differential effects for trading-expertise banks are not present outside the crisis period.