Real estate price growth affects credit risk for several reasons: it provides input for economic forecasts as it’s closely tied to economic growth; when used as collateral by banks, rising real estate prices may decrease both expected and actual losses; and banks may become less risk averse in lending practices in the presence of rising property prices. Therefore, we analyze these effects on loan portfolios’ estimated and realized risks on a local level. Using data of 390 German savings banks, however, we find that real estate prices have little or no impact on savings banks’ credit portfolio risk or risk precautions.

The spatial range between banks and their borrowers has commonly been considered as ambiguous in literature on borrower-lenderrelationships; On the one hand, a higher spatial separation increases informational costs, resulting in ceteris paribus higher interest rates charged by the lending bank. On the other hand, borrowers located closely to their lending banks are exposed to the local market power of the latter and therefore charged higher loan rates. With maintaining a single bank relationship, firms furthermore might occur liquidity risks. In this paper, the spatial distance between German firms and their banks is considered as impact on firms' lending rate. Employing Heckman's two-stage approach, there is strong evidence that distance has a positive impact on firms' lending rates in relationship lending. Die räumliche Entfernung zwischen einem Kreditnehmer und seiner Bank kann sich einerseits als eine Steigerung der mit Monitoring und Screening verbundenen Kosten äußern. Insbesondere ist dies bei Kreditnehmern relevant, die nur in geringerem Ausmaß über (kodifizierbare) Informationen verfügen, die leicht über weite Strecken transportiert werden können. Andererseits entscheidet die Entfernung zwischen Kreditnehmer und -geber maßgeblich über das Ausmaß lokaler Marktmacht der Bank. Im vorliegenden Beitrag wird die Auswirkung räumlicher Entfernung auf Kapitalkosten bei Anwendung des Relationship Lendings durch deutsche Unternehmen untersucht. Im Ergebnis des zweistufigen Heckman Verfahrens finden sich deutliche Hinweise auf eine positive Auswirkung räumlicher Entfernung auf die vom Unternehmen zu leistenden Kreditzinsen. charged higher interest rates by the lender (s. e.g. Petersen/Rajan 2002, 2543f; Degryse/ Ongena 2005, 234; Knyazeva/ Knyazeva 2012Knyazeva , 1195 Cenni et al. 2015, 251). The increase in interest rates on the other hand is only supposed to happen up to a certain location. At some point in space, other banks, located closer to the borrowing firm, are able to assign a loan to the borrower with lower interest rates due to lower incurring costs.Furthermore, it is commonly assumed that enterprises' opacity decreases with firm size due to a larger stock of employees, more reporting (obligations) and especially a longer history of the firm resulting in a better availability of firm specific data. Hence, large firms are able to provide hard facts as reliable information to their lenders when applying for credit and thus, in theory, ruling out distance to some high degree.Empirical Evidence on this topic is mixed. While e.g. Knyazeva/Knyazeva (2012) and Bellucci et al. (2013) find loan interest rates to increase with borrower-lender-distance, Degryse/Ongena (2005) and Agarwal/Hauswald (2010) find borrowers located closer to their lenders to be charged on average higher loan rates, due to local market power of the lending bank.This paper seeks to address whether geographical distances between banks and firms manifest in interest rates on firms' liabilities as lenders allocate their transport and inform...

No abstract

No abstract