The Anatomy of a Credit Supply Shock: Evidence from an Internal Credit Market

Liberti, José María; Sturgess, Jason

doi:10.2139/ssrn.2392013

Cited by 15 publications

(15 citation statements)

References 42 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This result suggests that borrower–lender relationships help mitigate credit supply shocks to small businesses, in line with the findings of non‐U.S. studies based on loan‐level data (Cotugno, Monferra, and Sampagnaro () for Italian banks, Liberti and Sturgess () for a single multinational lender).…”

supporting

confidence: 85%

Risk Overhang and Loan Portfolio Decisions: Small Business Loan Supply before and during the Financial Crisis

DeYoung¹,

Gron²,

Torna³

et al. 2015

The Journal of Finance

143

View full text Add to dashboard Cite

We estimate a structural model of bank portfolio lending and find that the typical U.S. community bank reduced its business lending during the global financial crisis. The decline in business credit was driven by increased risk overhang effects (consistent with a reduction in the liquidity of assets held on bank balance sheets) and by reduced loan supply elasticities suggestive of credit rationing (consistent with an increase in lender risk aversion). Nevertheless, we identify a group of strategically focused relationship banks that made and maintained higher levels of business loans during the crisis.

show abstract

supporting

confidence: 85%

Risk Overhang and Loan Portfolio Decisions: Small Business Loan Supply before and during the Financial Crisis

DeYoung¹,

Gron²,

Torna³

et al. 2015

The Journal of Finance

143

View full text Add to dashboard Cite

show abstract

“…8 For example, Sette andGobbi (2015), Beck et al (2018), and Liberti and Sturgess (2018) find protective results, although Jiménez et al (2017) find no differential effect of lending relationships.…”

Section: Related Literaturementioning

confidence: 99%

Unconventional Monetary Policy and Bank Lending Relationships

Cahn¹,

Duquerroy²,

Mullins³

2017

SSRN Journal

View full text Add to dashboard Cite

We explore how banks transmit central bank liquidity injections using unique variation in the ECB's 2011-12 Very Long-Term Refinancing Operations (VLTROs) which affected lending to firms discontinuously across credit ratings (i.e., within banks). We show that banks transmit liquidity differently to multi-bank firms than to firms with only one bank. Single-bank firms receive longer-term relationship lending and increase investment, while multi-bank firms receive short-term transactions-style lending only. Policy effects are attributable to increasing the maturity of bank borrowing from the ECB in combination with allowing banks to use loans to firms as collateral for such borrowing.

show abstract

“…For example De Jonghe, Dewachter, Mulier, Ongena, and Schepens (2016) show that Belgian banks reallocated credit to less risky firms during the financial crisis. Liberti and Sturgess (2018) and Ongena, Peydro, and van Horen (2013) also suggest some tendency for corporate loan substitution after a shock, towards borrowers that are less risky in some sense. However, the key difference between our paper and these existing studies is that the latter show evidence of de-risking within asset classes.…”

Section: Relation To Literaturementioning

confidence: 98%

“…We also note that De Jonghe, Dewachter, Mulier,Ongena, and Schepens (2016) exploit a crisis-era shock and restrict their analysis to banks and firms active in Belgium Ongena, Peydro, and van Horen (2013). consider mainly small and medium-sized firms in Eastern Europe and Turkey, whileLiberti and Sturgess (2018) are limited to data from a single multinational bank. As discussed below, our use of data from the especially important -and idiosyncratic -U.S. economy/banking system, post-crisis, provides an important addition to the literature, even when simply considering our data coverage.6 In a world where, increasingly, it is important to differentiate between risk weighted and total assets for regulatory purposes, our results provide important insights.…”

mentioning

confidence: 99%

De-leveraging or de-risking? How banks cope with loss

Bidder

Krainer

Shapiro

2021

Review of Economic Dynamics

View full text Add to dashboard Cite

We use variation in banks' loan exposure to industries adversely affected by the oil price declines of 2014 to explore how they respond to a net worth shock. Using granular data obtained under the Fed's stress testing programs we show that exposed banks tightened credit on corporate lending and on mortgages that they would ultimately hold on their balance sheet. However, they expanded credit for mortgages to be securitized, particularly those that are government-backed. Thus, banks re-balance their portfolio so as to lower their average risk weight, rather than scaling back the size of their balance sheet, as looking at on-balance-sheet corporate or residential lending alone would suggest. These results show the importance of taking a cross-balance sheet perspective when examining bank behavior. In addition, in terms of the ultimate 'credit channel' to firms and households, we show precisely how borrowers substitute to alternative financing when banks they initially borrow from tighten credit. In showing that there was ultimately a minimal impact on borrowers' overall funding, we provide a benchmark for crisis-period studies, which typically find a powerful credit channel effect.

show abstract

The Anatomy of a Credit Supply Shock: Evidence from an Internal Credit Market

Cited by 15 publications

References 42 publications

Risk Overhang and Loan Portfolio Decisions: Small Business Loan Supply before and during the Financial Crisis

Risk Overhang and Loan Portfolio Decisions: Small Business Loan Supply before and during the Financial Crisis

Unconventional Monetary Policy and Bank Lending Relationships

De-leveraging or de-risking? How banks cope with loss

Contact Info

Product

Resources

About