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A large literature has developed on the distinction between hard and soft information with much of this literature focused on displacement of soft information with hard information. We investigate whether the propensity of loan officers at local branches to incorporate soft information in the credit scoring process is affected by the geographical distance between the branch and the bank's headquarters. We find that hardening soft information is significantly sensitive to branch-toheadquarters distance. We also find that organizational distance affects time for loan approval, increasing approval time for applicants receiving a good credit score (i.e., low probability of default) originated at distant branches and reducing approval time for applicants with poor credit scores (i.e., high probability of default). Finally, we find that on average organizational distance has no direct impact on the likelihood of the occurrence of negative credit events. However, the final rating being equal, the hardening of soft information has an influence on loan performance that varies with organizational distance. Overall, our findings are consistent with the presence of spatially-based communication frictions within banking organizations.

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Using a unique proprietary dataset from a large European commercial bank containing granular loan-level information on credit lines to mid-corporate firms, we investigate the bank’s decisions to allow firms to retain existing credit at a time of acute financial instability. Our results highlight the importance of bank-firm relationships during crisis times. Existing borrowers who actively used their credit lines were not rationed, unless they posed an increased credit risk. We do not find evidence of evergreening practices.