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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

No 1215, Working Papers from Barcelona Graduate School of Economics

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-fdg and nep-mac
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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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