Banks’ supply of long term credit after a liquidity shock: Evidence from 2007-2009

P. Pessarossi and Frederic Vinas

Debats Economiques et financiers from Banque de France

Abstract: We study the real effect on banks’ credit supply after a negative liquidity shock. Controlling for demand effects, we take advantage of the exogenous international interbank market freeze in 2007-2008 to assess the causal relation between French banks’ liquidity risk and their lending. We find that banks with a lower funding risk and a lower ratio of long-term loans to long-term funding and deposits provide more loans after the shock. The difference in lending between banks only exists for long-term loan supply. Small firms bear the decline in longterm lending.

Keywords: financial institutions; liquidity risk; loan maturity. (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015
New Economics Papers: this item is included in nep-ban and nep-cfn
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:decfin:16

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