Fábián, Gergely and Fáykiss, Péter and Szigel, Gábor (2012): Toolkit for stimulating corporate lending. Published in: Crisis Aftermath: Economic policy changes in the EU and its Member States, Conference Proceedings, Szeged, University of Szeged , Vol. ISBN 9, (2012): pp. 90-111.
Download (679Kb) | Preview
Following the 2009 recession, a turnaround in corporate lending has not occurred in Hungary. Therefore, the risk of the phenomenon known in the literature as a creditless recovery has risen significantly. Based on empirical analyses, a creditless recovery leads to a slower and protracted economic recovery. Moreover, the escalating sovereign debt crisis in the peripheral euro area and banking regulatory responses in the EU may lead to more pronounced credit supply constraints by European banks, which could negatively affect the subsidiaries in the CEE region. The MNB staff has written numerous internal reports on the reasons behind the subdued lending and policy recommendations for reversing this trend. In this paper, we summarize the findings of this background research and review the state’s possible intervention alternatives to boosting corporate lending on both the supply and demand side. We think that the most effective way of intervention is that the public sector assumes partial credit risk from the banking sector, since a contraction in corporate lending can be attributed to credit supply constraints stemming from strong risk aversion by banks, making interest rates cuts ineffective in stimulating demand for loans. At the same time, it is important to note that state interventions involve substantial fiscal costs; simple, cost-free solutions do not exist among the options. Partial credit risk assumption is not an exemption either, as it translates into government expenditures quickly due to loan losses.
|Item Type:||MPRA Paper|
|Original Title:||Toolkit for stimulating corporate lending|
|Keywords:||corporate lending; credit supply constraints; loan guarantee schemes; lending stimulation; state-owned development banks|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
H - Public Economics > H8 - Miscellaneous Issues > H81 - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Beata Farkas|
|Date Deposited:||06. Aug 2012 14:07|
|Last Modified:||14. Feb 2013 03:17|
Abiad, A. – Dell’Ariccia, G. – Li, B. (2011): Creditless Recoveries, IMF Working Papers, WP/11/58, March 2011.
AECM (2010): Guarantees and the recovery: The impact of anti-crisis guarantee measures. www.aecm.eu, 2010
Balogh Cs. – Nagy M. (2009): Vállalati hitelezés ösztönzése nem hagyományos monetáris és fiskális eszközök segítségével (Stimulating corporate lending via non-traditional monetary and fiscal tools), Draft for the Monetary Council, manuscript, MNB.
Bartoli, F. – Ferri, G. – Murro, P. – Rotondi, Z. (2010): Bank-firm relations and the role of Mutual Guarantee Institutions during the crisis. Southern Europe Research in Economic Studies, Working Paper, 0034.
Fábián G. – Hudecz A. – Szigel G. (2010): Decline in corporate lending in Hungary and across the Central and East European region during the crisis, MNB Bulletin, October 2010.
Kiss G.P. (2011): Moving target indication: Fiscal indicators employed by the Magyar Nemzeti Bank, MNB Occasional Papers.
MNB (2011): Report on Financial Stability, April 2011, MNB, semi-annual publication. http://english.mnb.hu/Kiadvanyok/mnben_stabil
MNB (2012): Senior Loan Officer Survey on Bank Lending Practices (Lending survey), MNB, regular, quarterly publication. http://english.mnb.hu/Kiadvanyok/hitelezesi_felmeres
Sóvágó S. (2011): Identifying supply and demand in the Hungarian corporate loan market, MNB Occasional Papers 94.