Arbeitspapier

Some borrowers are more equal than others: Bank funding shocks and credit reallocation

This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank-firm level credit data, we show that banks reallocate credit within their loan portfolio in at least three different ways. First, banks reallocate to sectors where they have a high market share. Second, they also reallocate to sectors in which they are more specialized. Third, they reallocate credit towards low-risk firms. These reallocation effects are economically large. A standard deviation increase in sector market share, sector specialization or firm soundness reduces the transmission of the funding shock to credit supply by 22, 8 and 10 %, respectively.

Language: Englisch

Bibliographic citation: Series: NBB Working Paper ; No. 361

Classification: Wirtschaft
Financial Crises
Banks; Depository Institutions; Micro Finance Institutions; Mortgages

Subject: Credit reallocation
bank funding shock
bank credit
sector market share
sector specialization
firm risk

Event: Geistige Schöpfung

(who): De Jonghe, Olivier
Dewachter, Hans
Mulier, Klaas
Ongena, Steven
Schepens, Glenn

Event: Veröffentlichung

(who): National Bank of Belgium

(where): Brussels

(when): 2018

Handle: http://hdl.handle.net/10419/207741

Last update: 10.03.2025, 11:44 AM CET

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Arbeitspapier

Associated

De Jonghe, Olivier
Dewachter, Hans
Mulier, Klaas
Ongena, Steven
Schepens, Glenn
National Bank of Belgium

Time of origin

2018

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Some borrowers are more equal than others: Bank funding shocks and credit reallocation

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