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Screening and loan origination time: lending standards, loan defaults and bank failures

Mikel Bedayo, Gabriel Jiménez (), Jose-Luis Peydro () and Raquel Vegas ()
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Gabriel Jiménez: Banco de España
Raquel Vegas: Banco de España

No 2037, Working Papers from Banco de España

Abstract: We show that loan origination time is key for bank lending standards, cycles, defaults and failures. We exploit the credit register from Spain, with the time of a loan application and its granting. When VIX is lower (booms), banks shorten loan origination time, especially to riskier firms. Bank incentives (capital and competition), capacity constraints, and borrower-lender information asymmetries are key mechanisms driving results. Moreover, shorter (loan-level) origination time is associated with higher ex-post defaults, also using variation from holidays. Finally, shorter precrisis origination time —more than other lending conditions— is associated with more bank-level failures in crises, consistent with lower screening.

Keywords: loan origination time; lending standards; credit cycles; defaults; bank failures; screening (search for similar items in EconPapers)
JEL-codes: E44 E51 G01 G21 G28 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2020-11
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-mac
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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 20/Files/dt2037e.pdf First version, November 2020 (application/pdf)

Related works:
Working Paper: Screening and loan origination time: lending standards, loan defaults and bank failures (2021) Downloads
Working Paper: Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures (2021) Downloads
Working Paper: Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures (2020) Downloads
Working Paper: Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures (2020) Downloads
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