Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures

Peydró, José-Luis, Jiménez, Gabriel, Mikel Bedayo and Raquel Vegas
Authors registered in the RePEc Author Service: Jose-Luis Peydro and Gabriel Jimenez

No 15445, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that loan origination time is key for bank credit standards, defaults and failures over the cycle. We use the credit register from Spain, with the time of a loan application and its granting. When VIX is lower, banks shorten loan origination time, especially to less-capitalized firms. Bank moral hazard incentives (competition and capital) are crucial drivers. Moreover, shorter (loan-level) origination time implies higher ex-post defaults, especially for less-capitalized firms in areas with higher bank competition or when VIX is lower. Finally, shorter pre-crisis origination time involves more bank-level failures, even more than other lending conditions, consistent with lower screening.

Keywords: Loan origination time; Lending standards over the cycle; Defaults; Bank failures; Screening (search for similar items in EconPapers)
JEL-codes: E44 E51 G01 G21 G28 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-ban, nep-mac and nep-rmg
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Related works:
Working Paper: Screening and loan origination time: lending standards, loan defaults and bank failures (2020)
Working Paper: Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures (2020)
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