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Lending conditions in EU: The role of credit demand and supply

Svatopluk Kapounek (), Zuzana Kucerova () and Jarko Fidrmuc ()

Economic Modelling, 2017, vol. 67, issue C, 285-293

Abstract: We analyse the bank lending activity after the financial crisis and focus on bank-specific supply factors. Using a rich microeconomic dataset from Bankscope and macroeconomic shocks data, we employ OLS and 2SLS fixed effects models with banking controls, macroeconomic shocks and institutional quality. The banks’ loan-rate spreads increased despite the recent policy of low interest rates and quantitative easing. We use the bank asset quality as instruments to capture exogenous changes in loan supply. The empirical evidence shows that loan-rate spread and through this the supply of loans is negatively affected by a low asset quality and capital ratios.

Keywords: Bank lending; Loans; Financial vulnerability; Loan-rate spreads; Institutions; Macroeconomic shocks (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Date: 2017
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