Did pre-crisis mortgage lending limit post-crisis corporate lending? Evidence from UK bank balance sheets
Lu Zhang (),
Arzu Uluc () and
Dirk Bezemer ()
Additional contact information
Lu Zhang: Sustainable Finance Lab, The Netherlands., Postal: Sustainable Finance Lab, The Netherlands.
Dirk Bezemer: Global Economics and Management, University of Groningen, The Netherlands., Postal: Global Economics and Management, University of Groningen, The Netherlands.
No 651, Bank of England working papers from Bank of England
Was the bank credit crunch following the collapse of Lehman Brothers in September 2008 in many economies due to a loan supply collapse or to a decrease in loan demand? This paper investigates the effects of UK banks’ pre-crises exposure to residential property markets on their post-crisis business lending to explore the existence of a negative post-crisis loan supply shock. We isolate the loan supply effect from a loan demand effect by using a unique quasi-experimental setting and a rich, tailor-made micro-level data set on bank lending volumes, bank balance sheets and mortgage loan characteristics. Controlling for a range of bank-specific factors, we find that banks with larger shares of residential mortgages in total loans in 2008 Q2 reduced their lending to business more after 2008 Q3. Post-crisis lending to business is also sensitive to the riskiness of banks’ mortgage portfolios. Banks having more mortgages to borrowers with impaired credit history, or more mortgages to the self-employed, or mortgages with higher loan to value ratios prior to the crisis reduced their lending to non-financial businesses more.
Keywords: Credit crunch; bank balance sheets; mortgage lending; micro data; United Kingdom (search for similar items in EconPapers)
JEL-codes: E20 E32 E51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-ban, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... 7335399EEB5D6D8681DE Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0651
Access Statistics for this paper
More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().