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 2230, Working Paper Series from European Central Bank

Abstract: This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank-firm level credit data, we show that banks reallocate credit within their loan portfolio in at least three different ways. First, banks reallocate to sectors where they have a high market share. Second, they also reallocate to sectors in which they are more specialized. Third, they reallocate credit towards low-risk firms. These reallocation effects are economically large. A standard deviation increase in sector market share, sector specialization or firm soundness reduces the transmission of the funding shock to credit supply by 22, 8 and 10%, respectively. JEL Classification: G01, G21

Keywords: bank credit; bank funding shock; credit reallocation; firm risk; sector market share; sector specialization (search for similar items in EconPapers)
Date: 2019-01
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Citations: View citations in EconPapers (52)

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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:ecb:ecbwps:20192230

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