Lone (loan) wolf pack risk

Arbeitspapier

This paper proposes an early-warning bank risk measure based on the syndicate concentration of recent syndicated loans that a bank participates in. At the bank level, higher values of the measure predict greater risks (i.e., loan loss provisions, idiosyncratic return volatility, default probability, and frequency of lawsuits) and lower profitability at least three years ahead, especially for opaque and complex banks. Banks failing the Federal Reserve's forward-looking stress tests subsequently exhibit a reduction in the syndicate concentration measure. At the aggregate level, higher values of the measure predict both greater financial sector risks and economic slowdowns measured by private-sector investment, business activity, total factor productivity, industrial production, and gross domestic product.

Object Details

• ISBN: 978-952-323-433-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 4/2023

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Institutions and the Macroeconomy
• Subject: syndicate concentration ; early-warning ; bank risks ; financial sector risks ; economic slowdowns

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gao, Mingze ; Hasan, Iftekhar ; Qiu, Buhui ; Wu, Eliza
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/270434
• Last update: 10.03.2025, 11:42 AM CET