Credit Line Runs and Bank Risk Management: Evidence from the Disclosure of Stress Test Results

José E. Gutiérrez and Luis Fernández Lafuerza
Additional contact information
José E. Gutiérrez: Banco de España
Luis Fernández Lafuerza: Banco de España

No 2245, Working Papers from Banco de España

Abstract: As noted in recent literature, firms can run on credit lines due to fear of future credit restrictions. We exploit the 2011 stress test supervised by the European Banking Authority (EBA) and the Spanish Central Credit Register to explore: 1) the occurrence and magnitude of these runs after the release of negative stress test results; and 2) banks’ behaviour before and after the release of this information. We find that, following the release of the results, firms drew down approximately 10 pp more available funds from lines granted by banks that had a worse performance in the stress test. Moreover, before the release date, poorer performing banks were more likely to reduce the size of credit lines, while those with more significant balances of undrawn credit lines were more likely to cut term lending.

Keywords: credit lines; bank runs; stress tests; bank risk management (search for similar items in EconPapers)
JEL-codes: G01 G14 G21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2022-12
New Economics Papers: this item is included in nep-cfn, nep-des, nep-eec and nep-rmg
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 22/Files/dt2245e.pdf First version, December 2022 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2245

DOI: 10.53479/25006

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().