Hold-up in multiple banking: evidence from SME lending

This paper analyzes loan pricing when there is multiple banking and borrower distress. Using a unique data set on SME lending collected from major German banks, we can instrument for effective coordination between lenders, carrying out a panel estimation. The analysis allows to distinguish between rents that accrue due to single bank lending, rents that accrue due to relationship lending, and rents that accrue due to the elimination of competition among multiple lenders. We find the relationship lending to have no discernible impact on loan spreads, while both single lending and coordinated multiple lending significantly increase the spread. Thus, contrary to predictions in the literature, multiple lending does not insure the borrower against hold-up. JEL Classification: D74, G21, G33, G3

Key Trends in Chicago Area Mortgage Lending: Analysis of Data From the 2004 Chicago Area Community

This analysis of Chicago area mortgage lending is intended as a companion piece to Woodstock Institute's 2004 Chicago Area Community Lending Fact Book. It is meant to help put the mortgage lending data found in the Fact Book in a broader regional context. The first section analyzes regional trends in home purchase lending with a focus on changes in home buying patterns between 1999 and 2004. The second section focuses on patterns of high cost lending and foreclosures in the region

Payday lending: America's unsecured loan market [Business Ethics Case Study, 5000 words]

Case study for Business Ethics, 5000 words. Considers the state of the payday lending market in USA and Canada as of March 2018. Suitable for undergraduate or business school use. Includes the discussion of: Storefront and online payday lending in state/province and national contexts. Applicability of the concept of exploitation to payday lending. Alternatives to payday lending ("Payday Alternative Loans" provided through credit unions, and savings incentive programs that reduce demand for payday lending). U.S. government regulation of 2017 that was rescinded shortly before it was to have effects on business, specifically due to change of Presidential administration (January 2018). Class discussion questions. References

Local Predatory Lending Laws: Going Beyond North Carolina

Following the lead of federal regulations, numerous states, counties and cities have enacted laws designed to reduce predatory lending. There is at least anecdotal evidence that predatory or abusive mortgage lending is primarily concentrated in the subprime market. However, the impact of these local predatory lending laws on the subprime mortgage market is unknown. The primary questions we examine are: do these laws affect the supply and flow of subprime mortgage credit and does the experience in North Carolina, the first state to enact a local predatory lending law, apply to other local laws

Industries and the bank lending effects of bank credit demand and monetary policy in Germany

This paper presents evidence on the industry effects of bank lending in Germany and identifies the industry effects of bank lending associated with changes in monetary policy and industryspecific bank credit demand. To this end, we estimate individual bank lending functions for 13 manufacturing and non-manufacturing industries and five banking groups using quarterly bank balance sheet and bank lending data for the period 1992:1-2002:4. The evidence from dynamic panel data models shows that industry-specific bank lending growth predominantly responds to changes in industry-specific bank credit demand rather than to changes in monetary policy. In fact, conclusions regarding the bank lending effects of monetary policy are very sensitive to the choice of industry. The empirical results lend strong support to the existence of industry effects of bank lending. Because industries are a prominent source of variation in the bank lending effects of bank credit demand and monetary policy, the paper concludes that the industry composition of bank credit portfolios is an important determinant of bank lending growth and monetary policy effectiveness. --Monetary policy transmission,credit channel,industry structure,dynamic panel data

BANK CHARACTERISTICS, FIRM CHARACTERISTICS, BANK FUNDING STRUCTURE AND BANK LENDING DURING LIQUIDITY CRISIS USING A DYNAMIC PANEL MODEL (Study on Manufacturing Firms Listed on IDX 2011 – 2014)

This study aimed to see the behaviour of bank lending to manufacturing companies. The behaviour of bank lending is examined from the supply side, demand side and the structure of bank funding especially under a liquidity crisis. This study emphasize that less wholesale funding will be more beneficial for banks when there is a liquidity crisis. This study will also examine the effect of bank size, bank capital, bank credit risk, and the lender’s characteristics (firm size, firm value and firm leverage) on bank lending to manufacturing sector. The sample of this study is manufacturing companies listed in Indonesian Stock Exchange in 2011 until 2014. This study collected the long-term bank debt of manufacturing companies, the assets, CAR, NPL of the debtors and the assets, Tobin’s Q, DER of the lenders. The Arellano-Bond linear dynamic panel data method is used to analyse the determinants of bank lending. This study found that bank capital, firm leverage and firm value do not have significant influence on bank lending. On the other side, the interaction of bank funding structure and liquidity crisis, bank size and the first lagged value of bank lending have a positive and significant effect on bank lending while bank NPL and firm size have a negative and significant effect on bank lending

Do Payday Lending Bans Harm Consumers? Evidence from the Pawn Market

Payday lending is a highly controversial form of short-term, small-dollar credit that is banned in 13 states. Proponents of payday lending claim it provides a needed service to low-income families, and that bans take away options for these consumers, while its detractors claim it exploits vulnerable borrowers. I analyze the behavior of consumers in the market of a substitute, pawn shops, and find that consumers in states where payday lending is banned use pawn shops significantly more than consumers in states where payday lending is legal. This indicates that bans on payday lending could harm consumer welfare instead of preventing consumers from making ill-informed choices

Revisiting the Level Playing Field: International Lending Responses to Divergences in Japanese Bank Capital Regulations from the Basel Accord

The 1998 passage of the Land Revaluation Law in Japan provided regulatory forbearance to Japanese banks in the form of a regulatory capital infusion. We test whether this divergence from international bank capital requirements had an impact on Japanese bank lending behavior. Because this natural experiment created an exogenous supply shock, we can utilize it to disentangle demand and supply effects in order to determine the impact on Japanese bank lending in both the U.S. and Japan. We find that the infusion of regulatory capital had no aggregate impact on Japanese bank lending in Japan, but it did change the allocation of loans. Well-capitalized Japanese banks shifted their lending from low margin, less capital intensive mortgage lending toward higher yielding, more capital intensive commercial loans. Moreover, we find evidence consistent with a shifting of Japanese bank lending activity away from U.S. lending(which is predominately real estate based) to domestic lending to fund manufacturing. Thus, we find that divergences from international capital standards have significant allocative effects on lending, as well as on bank profitability.Basel; international lending; capital adequacy; allocative effects; aggregate effects

Loan origination under soft- and hard-information lending : [Version: August 2008]

This paper presents a novel model of the lending process that takes into account that loan officers must spend time and effort to originate new loans. Besides generating predictions on loan officers’ compensation and its interaction with the loan review process, the model sheds light on why competition could lead to excessively low lending standards. We also show how more intense competition may fasten the adoption of credit scoring. More generally, hard-information lending techniques such as credit scoring allow to give loan officers high-powered incentives without compromising the integrity and quality of the loan approval process. The model is finally applied to study the implications of loan sales on the adopted lending process and lending standard

Determinants of Commercial Banks’ Lending Behavior in Nigeria

This study investigated the determinants of commercial banks’ lending behaviour in the Nigerian context. The study aimed to test and confirm the effectiveness of the common determinants of commercial banks lending behaviour and how it affects the lending behaviour of commercial banks in Nigeria. The model used is estimated using Nigerian commercial banks loan advance (LOA) and other determinants or variables such as their volume of deposits (Vd), their investment portfolio (Ip), interest (lending) rate (Ir), stipulated cash reserve requirements ratio (Rr) and their liquidity ratio (Lr) for the period; 1980 – 2005. The model hypothesizes that there is functional relationship between the dependent variable and the specified independent variables. From the regression analysis, the model was found to be significant and its estimators turned out as expected and it was discovered that commercial banks deposits have the greatest impacts on their lending behaviour. The study then suggests that commercial banks should focus on mobilizing more deposits as this will enhance their lending performance and should formulate critical, realistic and comprehensive strategic and financial plans