To study the impact of macroprudential policy on credit supply cycles and real effects, we analyze dynamic provisioning. Introduced in Spain in 2000, revised four times, and tested in its ...countercyclicality during the crisis, it affected banks differentially. We find that dynamic provisioning smooths credit supply cycles and, in bad times, supports firm performance. A 1 percentage point increase in capital buffers extends credit to firms by 9 percentage points, increasing firm employment (6 percentage points) and survival (1 percentage point). Moreover, there are important compositional effects in credit supply related to risk and regulatory arbitrage by nonregulated and regulated but less affected banks.
We identify the effects of monetary policy on credit risk-taking with an exhaustive credit
register of loan applications and contracts. We separate the changes in the composition of the
supply of ...credit from the concurrent changes in the volume of supply and quality and volume
of demand. We employ a two-stage model that analyzes the granting of loan applications in
the first stage and loan outcomes for the applications granted in the second stage, and that
controls for both observed and unobserved, time-varying, firm and bank heterogeneity through
time*firm and time*bank fixed effects. We find that a lower overnight interest rate induces
lowly capitalized banks to grant more loan applications to ex-ante risky firms and to commit
larger loan volumes with fewer collateral requirements to these firms, yet with a higher expost likelihood of default. A lower long-term interest rate and other relevant macroeconomic
variables have no such effects.
We study bank credit booms, exploiting the Spanish matched credit register over 2001-2009. We extend Khwaja and Mian (2008)’s loan-level estimator by incorporating firm-level general equilibrium ...adjustments. Higher ex-ante bank real-estate exposure increases credit supply to non-real-estate firms, but effects are neutralized by firm-level adjustments for firms with existing banking relationships. However, higher bank real-estate exposure increases risk-taking, by relaxing standards of existing borrowers (cheaper, longer-term and less collateralized credit), and by expanding credit on the extensive margin to first-time borrowers that default substantially more. Results suggest that the mechanism at work is greater liquidity via securitization of real-estate assets
We analyze the impact of monetary policy on the supply of bank credit. Monetary policy affects both loan supply and demand, thus making identification a steep challenge. We therefore analyze a novel, ...supervisory dataset with loan applications from Spain. Accounting for time-varying firm heterogeneity in loan demand, we find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios; responding to applications for the same loan, weak banks are less likely to grant the loan. Finally, firms cannot offset the resultant credit restriction by applying to other banks.
How does competition affect bank risk-taking? Jiménez, Gabriel; Lopez, Jose A.; Saurina, Jesús
Journal of financial stability,
June 2013, 2013-6-00, Letnik:
9, Številka:
2
Journal Article
Recenzirano
A common assumption in the academic literature and in the supervision of banking systems is that franchise value plays a key role in limiting bank risk-taking. As market power is the primary source ...of franchise value, reduced competition in banking markets has been seen as promoting banking stability. A recent paper by Martínez-Miera and Repullo (MMR, 2010) shows that a nonlinear relationship theoretically exists between bank competition and risk-taking in the loan market. We test this hypothesis using data from the Spanish banking system. After controlling for macroeconomic conditions and bank characteristics, we find support for this nonlinear relationship using standard measures of market concentration in both the loan and deposit markets. When direct measures of market power, such as Lerner indices, are used, the empirical results are more supportive of the original franchise value hypothesis, but only in the loan market. Overall, the results highlight the empirical relevance of the MMR model, even though further analysis across other banking markets is needed.
Determinants of collateral Jiménez, Gabriel; Salas, Vicente; Saurina, Jesús
Journal of financial economics,
08/2006, Letnik:
81, Številka:
2
Journal Article
Recenzirano
Odprti dostop
We estimate a comprehensive model of the determinants of collateral in loans extended to business firms. We use a panel data on a sample of bank loans to Spanish firms from 1984 to 2002. Consistent ...with theories that view collateral as a solution to adverse selection problems, our results provide direct evidence of a negative association between collateral and a borrower's risk. We also present evidence on previously unexplored determinants of collateral such as credit market competition, lender type, and the business cycle.
This paper analyses the determinants of the probability of default (PD) of bank loans. We focus the discussion on the role of a limited set of variables (collateral, type of lender and bank–borrower ...relationship) while controlling for the other explanatory variables. The study uses information on the more than three million loans entered into by Spanish credit institutions over a complete business cycle (1988–2000) collected by the Bank of Spain's Credit Register (
Central de Informaci
ó
n de Riesgos). We find that collateralised loans have a higher PD, loans granted by savings banks are riskier and, finally, that a close bank–borrower relationship increases the willingness to take more risk.
Empirical Analysis of Corporate Credit Lines Jiménez, Gabriel; Lopez, Jose A.; Saurina, Jesús
The Review of financial studies,
12/2009, Letnik:
22, Številka:
12
Journal Article
Recenzirano
Odprti dostop
Since bank credit lines are a major source of corporate funding, we examine the determinants of their usage with a comprehensive database of Spanish corporate credit lines. A line's default status is ...a key factor driving its usage, which increases as firm financial conditions worsen. Firms with prior defaults access their credit lines less, suggesting that bank monitoring influences firms' usage decisions. Line usage has an aging effect that causes it to decrease by roughly 10% per year of its life. Lender characteristics, such as the length of a firm's banking relationships, as well as macroeconomic conditions, affect usage decisions.
Although credit risk is an important fact that financial institutions must cope with, the determination of bank problem loans have been little studied. Using panel data, this paper compares the ...determinants of problem loans of Spanish commercial and savings banks in the period 1985-1997, taking into account both macroeconomic and individual bank level variables. The GDP growth rate, firms, and family indebtedness, rapid past credit or branch expansion, inefficiency, portfolio composition, size, net interest margin, capital ratio, and market power are variables that explain credit risk. However, there are significant differences between commercial and savings banks, which confirm the relevance of the institutional form in the management of credit risk. The findings raise important bank supervisory policy issues: the use of bank level variables as early warning indicators, the advantages of bank mergers from different regions, and the role of banking competition and ownership in determining credit risk.
We examine the effect of financial constraints on firm investment and cash flow. We combine data from the Spanish Mercantile Registry and the Bank of Spain Credit Registry to classify firms according ...to whether they are family-owned, not family-owned, or belong to a family-linked network of firms and according to their number of banking relations (with none, one, or several banks). Our empirical strategy is structural, based on a dynamic model solved numerically to generate the joint distribution of firm capital (size), investment, and cash flow, both in cross sections and in panel data. We consider three alternative financial settings: saving only, borrowing and lending, and moral hazard constrained state-contingent credit. We estimate each setting via maximum likelihood and compare across these financial regimes. Based on the estimated financial regime, we show that family firms, especially those belonging to networks based on ownership, are associated with a more flexible market or contract environment and are less financially constrained than nonfamily firms. This result survives stratifications of family and nonfamily firms by bank status, region, industry, and time period. Family firms are better able to allocate funds and smooth investment across states of the world and over time, arguably done informally or using the cash flow generated at the level of the network. We also validate our structural approach by demonstrating that it performs well in traditional categories, by stratifying firms by size and age, and find that smaller and younger firms are more constrained than larger and older firms.
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