Some Borrowers are More Equal than Others: Bank Funding Shocks and Credit Reallocation

Olivier De Jonghe, Hans Dewachter, Klaas Mulier, Steven Ongena and Glenn Schepens

No 19-45, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank- rm level credit data, we show that banks reallocate credit within their domestic loan portfolio in at least three different ways. First, banks reallocate to sectors where they have high sector presence. Second, they also reallocate to sectors in which they are heavily specialized. Third, they reallocate credit towards low-risk fi rms. These reallocation effects are economically large. A standard deviation improvement in sector presence, sector specialization or fi rm risk reduces the transmission of the funding shock to credit supply by 22, 8 and 10%, respectively.

Keywords: lCredit reallocation; bank funding shock; domestic credit; sector specialization; firm risk (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2019-08
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (48)

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Related works:
Journal Article: Some Borrowers Are More Equal than Others: Bank Funding Shocks and Credit Reallocation* (2020)
Working Paper: Some borrowers are more equal than others: bank funding shocks and credit reallocation (2019)
Working Paper: Some borrowers are more equal than others: Bank funding shocks and credit reallocation (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1945

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