The German financial market is often characterized as a bank-based system with strong bank-customer relationships. The corresponding notion of a housebank is closely related to the theoretical idea of relationship lending. It is the objective of this paper to provide a direct comparison between housebanks and "normal" banks as to their credit policy. Therefore, we analyze a new data set, representing a random sample of borrowers drawn from the credit portfolios of five leading German banks over a period of five years. We use credit-file data rather than industry survey data and, thus, focus the analysis on information that is directly related to actual credit decisions. In particular, we use bank-internal borrower rating data to evaluate borrower quality, and the bank's own assessment of its housebank status to control for informationintensive relationships. The major results of our study support the view that housebanks are able to establish a distinct behavioral pattern consistent with the idea of long-term commitment. We find that housebanks do provide liquidity insurance in situations of unexpected deterioration of borrower ratings. With respect to loan pricing, we find no evidence for intra-or intertemporal price differentiation related to housebanking.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Abstract:Multiple banking is a common characteristic of the corporate lending, particularly of midsized and large firms. However, if the firms are facing distress, multiple lenders may have serious coordination problems, as has been argued in the theoretical literature. In this paper we analyze the problems of multiple banking in borrower distress empirically. We rely on a unique panel data set that includes detailed credit-file information on distressed lending relationships in Germany. In particular, it includes information on bank pools, a legal institution aimed at coordinating lender interests in distress. We find that the existence of small pools increases the probability of workout success and that bargaining costs are positively related to pool size. We identify major determinants of pool formation, in particular the number of banks, the distribution of lending among banks, and the severity of the distress.JEL Classification: D74, G21, G33, G34
This paper contributes to the economics of financial institutions risk management by exploring how loan securitization affects their default risk, their systematic risk, and their stock prices. In a typical CDO transaction a bank retains through a first loss piece a very high proportion of the default losses, and transfers only the extreme losses to other market participants. The size of the first loss piece is largely driven by the average default probability of the securitized assets. If the bank sells loans in a true sale transaction, it may use the proceeds to expand its loan business, thereby affecting systematic risk. For a sample of European CDO issues, we find an increase of the banks' betas, but no significant stock price effect around the announcement of a CDO issue.
Bank internal ratings of corporate clients are intended to quantify the expected likelihood of future borrower defaults. This paper develops a comprehensive framework for evaluating the quality of standard rating systems. We suggest a number of principles that ought to be met by "good rating practice". These "generally accepted rating principles" are potentially relevant for the improvement of existing rating systems. They are also relevant for the development of certification standards for internal rating systems, as currently discussed in a consultative paper issued by the Bank for International Settlements in Basle, entitled "A new capital adequacy framework". We would very much appreciate any comments by readers that help to develop these rating standards further. * In developing the above rating principles we were able to draw on inspiration and discussion from many sources. First, the CFS-based joint research project on Bank Risk Management gave us basic insights into the rating practice of the leading German banks, with emphasis on methodology and statistical testing. Project partners were the Chief Credit Officers, as well as their staff, of Deutsche Bank, Dresdner Bank AG, Commerzbank AG, HypoVereinsbank, DG Bank, and West LB. Our academic project partners, notably Bernd Rudolph, have also provided many helpful comments and suggestions. Second, we profited immensely from
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.