To Ask or Not To Ask? Collateral versus Screening in Lending Relationships

Artashes Karapetyan
Authors registered in the RePEc Author Service: Hans Degryse and Sudipto Karmakar

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: We study the impact of higher capital requirements on banks' decisions to grant collateralized rather than uncollateralized loans. We exploit the 2011 EBA capital exercise, a quasi-natural experiment that required a number of banks to increase their regulatory capital but not others. This experiment makes secured lending more attractive vis-à-vis unsecured lending for the affected banks as secured loans require less regulatory capital. Using a loan-level dataset covering all corporate loans in Portugal, we identify a novel channel of tighter capital requirements: relative to the control group and after the shock, treated banks require loans more often to be collateralized but less so for relationship borrowers. We further nd this impact is stronger for collateral that saves more on regulatory capital.

JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: To Ask or Not To Ask? Collateral versus Screening in Lending Relationships (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w201819

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