The crisis as a wake-up call. Do banks increase screening and monitoring during a financial crisis?

de Haas, Ralph and van Horen, Neeltje (2009): The crisis as a wake-up call. Do banks increase screening and monitoring during a financial crisis?

Abstract

We examine whether banks have systematically stepped up their screening and monitoring efforts during the current global financial crisis. To this end we analyze nearly 17,000 syndicated loans to private borrowers in 60 countries over the period 2005-2008. We find that during the crisis arranging banks started to retain larger loan portions and form more concentrated syndicates, reflecting an increased need to screen and monitor borrowers. During the crisis agency problems were attenuated – and lending standards hence tightened less – in syndicates that were composed by experienced arrangers and that were lending to repeat borrowers. In contrast, borrower credit ratings did little to alleviate agency problems during the crisis.

• Item Type: MPRA Paper
• Language: English
• Keywords: bank lending; financial crisis; asymmetric information; syndication
• Subjects: G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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