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Bank Heterogeneity and Interest Rate Setting: What Lessons Have We Learned since Lehman Brothers?

Leonardo Gambacorta () and Paolo Emilio Mistrulli ()

Journal of Money, Credit and Banking, 2014, vol. 46, issue 4, 753-778

Abstract: A substantial literature has investigated the role of relationship lending in shielding borrowers from idiosyncratic shocks. Much less is known about how lending relationships and bank‐specific characteristics affect the functioning of the credit market in an economy‐wide crisis. We investigate how bank and bank–firm relationship characteristics have influenced interest rate setting since the collapse of Lehman Brothers. We find that interest rate spreads increased by less for those borrowers having closer lending relationships. Furthermore, firms borrowing from banks endowed with large capital and liquidity buffers and from banks engaged mainly in traditional lending were kept more insulated from the financial crisis.

Date: 2014
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http://hdl.handle.net/10.1111/jmcb.12124

Related works:
Working Paper: Bank heterogeneity and interest rate setting: what lessons have we learned since Lehman Brothers? (2011) Downloads
Working Paper: Bank heterogeneity and interest rate setting: What lessons have we learned since Lehman Brothers? (2011) Downloads
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Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

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