Shock propagation and banking structure

Arbeitspapier

We conjecture that lenders' decisions to provide liquidity are affected by the extent to which they internalize negative spillovers. We show that lenders with a large share of loans outstanding in an industry provide liquidity to industries in distress when spillovers are expected to be strong, because fire sales are likely to ensue. Lenders with a large share of outstanding loans also provide liquidity to customers and suppliers of industries in distress, especially when the disruption of supply chains is expected to be costly. Our results suggest a novel channel explaining why credit concentration may favor financial stability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 348

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Production ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Financial Institutions and Services: General ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Transactional Relationships; Contracts and Reputation; Networks
• Subject: syndicated loans ; bank concentration ; supply chains ; fire sales ; externalities

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Giannetti, Mariassunta ; Saidi, Farzad
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/189948
• Last update: 10.03.2025, 11:46 AM CET