Running for the Exit? International Bank Lending During a Financial Crisis

Haas, Ralph De; Horen, Neeltje van

doi:10.1093/rfs/hhs113

Cited by 392 publications

(217 citation statements)

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“…In our empirical analysis, and following the usual practice in studies of the syndicated loan market (e.g., Cai, Saudners and Steffen, 2012;De Haas and Van Horen, 2013), we use the available observations for all the participants in each syndicated loan and not only those for the lead arranger(s). In loan syndication, all members share loan documents (loan agreement, collateral, covenant, etc.)…”

Section: Empirical Identificationmentioning

confidence: 99%

“…First, we use only bank fixed effects, add purpose fixed effects, or cluster the standard errors by year or by loan. Second, we use alternative methods to weight the Lerner index, instead of using equal shares for the members of the syndicate (see also De Haas and Van Horen, 2013). Third, we use a translog specification (instead of the nonparametric specification).…”

Section: The Matching Of Low-performance Firms With High-market Powermentioning

confidence: 99%

“…De Haas and Van Horen (2013) for example study the syndicated loan market and suggest that local lending experience also gives banks more market power vis-a-vis their borrowers (who have even less incentive then to switch to another bank and banks can exploit this by charging a higher interest rate). This is because through repeat lending (lending experience from the same banks that participate in the syndication or lending to the same firm), banks reduce information asymmetries and build up proprietary information about borrowers.…”

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confidence: 99%

“…Our database contains full information on loan shares for 24 percent of all loans and for these loans we allocate the exact loan portions to the individual lenders. For the other 76 percent we primarily employ the approach introduced by De Haas and Van Horen (2013); that is we divide the loan equally among the syndicate members. Section 4.2 presents robustness tests that show that our results also hold when we allocate the shares for the 76 percent of the sample in other ways (as in De…”

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confidence: 99%

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Bank Market Power and Firm Performance

2015

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Does market power of banks affect firm performance? To answer this question we examine 25,236 syndicated loan facilities granted between 2000 and 2010 by 296 banks to 9,029 US non-financial firms. Accounting for both observed and unobserved bank and firm heterogeneity, we find that firms that were recently poorly performing obtain loans from banks with more market power. However, in the year after loan origination market power positively affects firm performance, but only if it is not too high. Our estimates thus suggest that bank market power can facilitate access to credit by poorly-performing firms, yet at the same time also boosts the performance of the firms that obtain credit.

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Section: Empirical Identificationmentioning

confidence: 99%

Section: The Matching Of Low-performance Firms With High-market Powermentioning

confidence: 99%

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Bank Market Power and Firm Performance

2015

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“…Our previous results were obtained under the assumption that both affiliates of German IBHCs and affiliates of non-German IBHCs were equally affected by transfers of supporting funds through internal capital markets. But De Haas and Van Horen (2012) provide evidence that internal capital markets during crisis may favor home country banks. Therefore foreign banks with access to funding may not be affected in the same way and distort our results.…”

Section: The Impact Of Large Banksmentioning

confidence: 99%

Cross-border transmission of emergency liquidity

Kick

Koetter

Storz

2020

Journal of Banking & Finance

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Reproduction permitted only if source is stated. ISBN Non-technical summary Research QuestionIn response to the global financial crisis, the Federal Reserve Bank (Fed ) established several emergency facilities during the period from December 2007 to April 2010 peaking at USD 1.2 trillion at the end of 2008. The emergency facilities aimed at lifting liquidity constraints and mitigating bank lending contraction. Funds from the emergency facilities were accessible to U.S. banks as well as subsidiaries of foreign banks. The latter are parts of internal capital markets of internationally active bank holding companies (IBHCs). This study asks whether unconventional U.S. monetary policy in terms of emergency facilities transmitted to banking markets outside the U.S. and changed interest rate setting behavior. ContributionWith this analysis, we contribute to the literature on the cross-border transmission of monetary policy by examining the link between the Fed emergency facilities and the legal framework in which non-U.S. banks have access to them. The study employs detailed information on the use of emergency liquidity of U.S. banks that had not been available prior to 2011 due to restrictions by the Fed. The data allow us to differentiate between German banks with access to the U.S. liquidity support and banks without access. Our approach compares interest rates of both groups of banks during the period in which the emergency facilities were active and the surrounding period. ResultsWe find a significant, contemporaneous decline in the short-term deposit rates of banks with access to the U.S. liquidity facilities compared to banks without access to these funding sources. Banks with access to these facilities show significantly decreased shortterm funding costs, while both credit pricing and lending volumes remain unchanged. Short-term corporate loan rates decline as well with a lag between two to four months. These spillover effects of U.S. monetary policy are confined to short-term rates. AbstractWe show that emergency liquidity provision by the Federal Reserve transmitted to non-U.S. banking markets. Based on manually collected holding company structures of international banks, we can identify banks in Germany with access to U.S. facilities via internal capital markets. Using proprietary interest rate data reported to the German central bank, we compare lending and borrowing rates of banks with and without such access. U.S. liquidity shocks cause a significant decrease in the short-term funding costs of German banks with access. Short-term loan rates charged to German corporates also decline, albeit with lags between two and four months. These spillover effects of U.S. monetary policy are confined to short-term rates.

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Liquidity Shocks and the Supply of Credit After the 2007–2008 Crisis

Kapan¹,

Minoiu

2013

Int. J Fin Econ

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We examine the impact of heightened liquidity risk in bank funding markets during the 2007-2008 subprime crisis on the supply of credit to firms internationally. Our sample comprises almost 800 banks lending in the syndicated loan market to borrowers from 48 advanced and emerging market economies. To control for simultaneous changes in demand, we relate within-borrower changes in bank credit from multiple banks to banks' exposure to liquidity risk. To capture banks' vulnerability to the liquidity shocks that occurred during 2007-2008, we use measures of pre-crisis reliance on wholesale funding. Our results suggest that banks that were more exposed to liquidity risk during the crisis reduced syndicated lending more than other banks. Our results are robust to alternate measures of vulnerability to liquidity risk, choice of sample period and simultaneous movements in exchange rates. The 2007-2008 financial crisis was marked by a sudden freeze in credit markets, which triggered a worldwide liquidity shock. In its aftermath, bank lending in many economies contracted sharply, plunging the world in a protracted recession. Because of the deteriorating economic outlook, the demand for credit simultaneously fell. In this paper, we study the transmission of liquidity shocks through the international bank lending channel after the 2007-2008 crisis and trace their impact on the supply of credit. Our main goal is to quantify the link between bank balance sheet vulnerabilities and banks' ability to sustain lending in the face of financial market turmoil, and hence, to provide evidence of linkages between the financial sector and the real economy. Furthermore, we wish our analysis to be broad in scope, mirroring the global reach of the financial crisis, hence to comprise a diverse set of banks that lend to firms globally.For this purpose, we use data on syndicated loans made by about 800 banks to firms from 48 countries, including advanced and emerging market economies. Syndicated loans are an important source of funding for corporations worldwide, especially firms from emerging market countries. We are motivated in our analysis by the large downward adjustment that took place in the syndicated loan market after the US subprime crisis. After a decade of fast growth, new loan origination to firms in advanced economies declined by two-thirds in

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Running for the Exit? International Bank Lending During a Financial Crisis

Cited by 392 publications

References 69 publications

Bank Market Power and Firm Performance

Bank Market Power and Firm Performance

Cross-border transmission of emergency liquidity

Liquidity Shocks and the Supply of Credit After the 2007–2008 Crisis

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