de Haas, Ralph and van Horen, Neeltje (2009): The crisis as a wake-up call. Do banks tighten lending standards during a financial crisis?
Download (151kB) | Preview
We examine whether the global financial crisis has prompted banks to tighten lending standards. By analyzing nearly 31,000 syndicated loans to private borrowers in 65 countries over the period 2005-2009, we find that banks not only cut lending during a crisis but also increase their screening and monitoring. Lending standards are tightened in particular for uncollateralized loans, loans to first-time borrowers, and financial-sector borrowers in developed countries. While in developed countries screening and monitoring increases less for loans to rated borrowers and for loans structured by well-known arrangers, we show that the attenuating impact of credit ratings and arranger reputation does not extend to emerging markets.
|Item Type:||MPRA Paper|
|Original Title:||The crisis as a wake-up call. Do banks tighten lending standards during a financial crisis?|
|Keywords:||bank lending; financial crisis; asymmetric information; screening; monitoring; 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
|Depositing User:||Neeltje Van Horen|
|Date Deposited:||22. Jul 2009 05:35|
|Last Modified:||14. Feb 2013 02:50|
Allen, F. (1990), The market for information and the origin of financial intermediation, Journal of Financial Intermediation, 1, 3-30.
Banker, The (2008), Competition for syndicated loans, 03-11-2008.
Barbosa, L. and N. Ribeiro (2007), Determinants of spreads in syndicated loans to euro area borrowers, mimeo.
Berger, A. and G. Udell (1990), Collateral, loan quality, and bank risk, Journal of Monetary Economics, 25, 21-42.
Berger, A. and G. Udell (2004), The institutional memory hypothesis and the procyclicality of bank lending behavior, Journal of Financial Intermediation, 13, 458-495.
Bolton, P. And D.S. Scharfstein (1996), Optimal debt structure and the number of creditors, Journal of Political Economy, 104(1), 1-25.
Boot, A.W.A. (2000), Relationship banking: What do we know?, Journal of Financial Intermediation, 9, 7-15.
Broecker, T. (1990), Creditworthiness tests and interbank competition, Econometrica, 58, 429-452.
Calomiris, C.W. and B. Wilson (2004), Bank capital and portfolio management: The 1930s “capital crunch” and the scramble to shed risk, Journal of Business, 77(3), 421-454.
Cetorelli, N. and L.S. Goldberg (2009), Globalized banks: Lending to emerging markets in the crisis, Federal Reserve Bank of New York Staff Report No. 377, New York.
Champagne, C. and L. Kryzanowski (2007), Journal of Banking & Finance, 31, 3145-3161.
Chen, H.C., C.J. Jhou and H.C. Yeh (2007), Signalling by underwriter retention rate in the IPO market, Applied Economics, 39(15), 1973-1983.
Chowdhry, B. (1991), What is different about international lending?, Review of Financial Studies, 4(1), 121-148.
Corwin, S.A. and P. Schultz (2005), The role of IPO underwriting syndicates: Pricing, information production, and underwriter competition, Journal of Finance, 60, 443-486.
De Haas, R.T.A. and I.P.P. Van Lelyveld (2006), Foreign banks and credit stability in Central and Eastern Europe: A panel data analysis, Journal of Banking & Finance, 30, 1927-1952.
De Haas, R.T.A. and I.P.P. Van Lelyveld (2009), Internal capital markets and lending by multinational bank subsidiaries, Journal of Financial Intermediation, forthcoming.
Demirgüç-Kunt, A., E. Detragiache and P. Gupta (2006), Inside the crisis: an empirical analysis of banking systems in distress, Journal of International Money and Finance, 25, 702-718.
Dennis, S.A. and D.J. Mullineaux (2000), Syndicated loans, Journal of Financial Intermediation, 9, 404-426.
Depository Trust and Clearing Corporation (DTCC) (2008), Transforming the Syndicated Loan Market. A White Paper to the Industry, http://www.dtcc.com/downloads/leadership/whitepapers/ Transforming_Syndicated_Loan_Market.pdf.
Diamond, D.W. (1984), Financial intermediation and delegated monitoring, Review of Economic Studies, 51(3), 393-414.
Diamond, D.W. (1991), Monitoring and reputation: The choice between bank loans and directly placed debt, Journal of Political Economy, 99, 689-721.
Esty, B.C. and W.L. Megginson (2003), Creditor rights, enforcement and debt ownership structure: evidence from the global syndicated loan market, Journal of Financial and Quantitative Analysis, 38, 37-59.
Fight, A. (2004), Syndicated lending, Elsevier Butterworth-Heinemann, Oxford.
Gatev, E. and P. Strahan (2009), Liquidity risk and syndicate structure, Journal of Financial Economics, forthcoming.
Gatti, S., S. Kleimeier, W.L. Megginson and A. Steffanoni (2008), Arranger certification in project finance, mimeo.
Giannetti, M. and Y. Yafeh (2008), Do cultural differences between contracting parties matter? Evidence from syndicated bank loans, mimeo.
Godlewski, C.J. (2008), What drives the arrangement timetable of bank loan syndications?, Laboratoire de Recherche en Gestion et Economie Working Paper No. 2008-02, Université de Strasbourg.
Goplan, R., V. Nanda and V. Yerramilli (2007), Lead arranger reputation and the loan syndication market, mimeo.
Gorton, G. and G. Pennachi (1995), Banks and loan sales: Marketing non-marketable assets, Journal of Monetary Economics, 35, 389-411.
Holmström, B. and J. Tirole (1997), Financial intermediation, loanable funds, and the real sector, Quarterly Journal of Economics, CXII, 663-691.
Ivashina, V. (2009), Asymmetric information effects on loan spreads, Journal of Financial Economics, 92, 300-319.
Ivashina, V. and D. Scharfstein (2008), Bank lending during the financial crisis of 2008, mimeo.
Jones, J.D., W.W. Lang and P.J. Nigro (2005), Agent bank behavior in bank loan syndications, Journal of Financial Research, 28(3), 385-402.
Kleimeier, S. and W.L. Megginson, Are project finance loans different from other syndicated credits?, Journal of Applied Corporate Finance, 13(1), 75-87.
Lee, S.W. and D.J. Mullineaux (2004), Monitoring, financial distress, and the structure of commercial lending syndicates, Financial Management, autumn, 107-129.
Leland, H. and D. Pyle (1977), Information asymmetries, financial structure, and financial intermediation, Journal of Finance, 32, 371-87.
Ongena, S. (1999), Lending relationships, bank default, and economic activity, International Journal of the Economics of Business, 6(2), 257-280.
Pennacchi, G. (1988), Loan sales and the cost of bank capital, Journal of Finance, 43, 375-396.
Preece, D. and D.J. Mullineaux (1996), Monitoring, loan renegotiability, and firm value: The role of lending syndicates, Journal of Banking & Finance, 20, 577-593.
Puti, M., J. Rocholl, and S. Steffen (2009), Supply side effects of bank lending to consumers during the 2008 financial crisis, mimeo.
Rajan, R.G. (1992), Insiders and outsiders: the choice between informed and arm’s-length debt, Journal of Finance, 47, 1367-1400.
Rajan, R.G. (1994), Why bank credit policies fluctuate: A theory and some evidence, Quarterly Journal of Economics, 109, 399-441.
Ruckes, M. (2004), Bank competition and credit standards, Review of Financial Studies, 17, 1073-1102.
Simons, K. (1993), Why do banks syndicate loans?, New England Economic Review, January/February, 45-52.
Sufi, A. (2007), Information asymmetry and financing arrangements: Evidence from syndicated loans, Journal of Finance, 62, 629-668.
Taylor, J.B. (2008), The financial crisis and the policy responses: An empirical analysis of what went wrong, mimeo.
Available Versions of this Item
The strategic behavior of banks during a financial crisis; evidence from the syndicated loan market. (deposited 19. Mar 2009 05:32)
The crisis as a wake-up call. Do banks increase screening and monitoring during a financial crisis? (deposited 15. Apr 2009 00:14)
The crisis as a wake-up call. Do banks increase screening and monitoring during a financial crisis? (deposited 06. May 2009 00:04)
- The crisis as a wake-up call. Do banks tighten lending standards during a financial crisis? (deposited 22. Jul 2009 05:35) [Currently Displayed]
- The crisis as a wake-up call. Do banks increase screening and monitoring during a financial crisis? (deposited 06. May 2009 00:04)
- The crisis as a wake-up call. Do banks increase screening and monitoring during a financial crisis? (deposited 15. Apr 2009 00:14)