Creditor concentration: an empirical investigation

Most of the literature addressing multiple banking assumes equal financing shares. However, unequal, concentrated or asymmetric bank borrowing is widespread. This paper investigates the determinants of creditor concentration for German firms using a comprehensive bank-firm level dataset for the time period between 1993 and 2003. We document that lending is very often concentrated and, consequently, that relationship lending is important, not only for the small firms but also for the larger firms in our sample. However, we also find that risky, illiquid, large and leveraged firms spread their borrowing more evenly between multiple lenders. On the other hand, the degree of concentration increases with the profitability of the relationship lender. Relationship lending may spur financing provided by other banks, especially if the relationship lender is a public sector bank and if the other banks are large or do not have to tie up additional funds in capital. --bank relationships,asymmetric financing,banking competition

Do exposures to sagging real estate, subprime or conduits abroad lead to contraction and flight to quality in bank lending at home?

We investigate how differential exposures by German banks to the US real estate market affect domestic lending in Germany when home prices started to decline in the US. We find that banks with an exposure to the US real estate sector and to conduits shift their domestic lending to industry–region combinations with lower insolvency ratios following a decrease in US home prices. These banks also contract their lending to German firms more than banks that do not have such exposure. We mainly document that possible losses abroad shift bank lending at home where the size of the effect depends on the type and the degree of exposure the bank has

German Bank Lending During Financial Crises: A Bank Level Analysis

This paper studies German bank lending during the Asian and Russian crises, using a bank level data set from the Deutsche Bundesbank. Our aim is to gain more insight into the pattern of German bank lending during financial crises in emerging markets. We find that German banks reacted to the Asian crisis mainly by reallocating their portfolios among emerging markets. By contrast, the banks' behaviour during the Russian crisis is characterised by a general withdrawal from emerging markets. We find that the lending of large commercial banks was less stable than the lending of public sector banks during the Asian crisis. Differences were not as pronounced during the Russian crisis.bank lending; banking; contagion; currency crises; emerging markets crises; financial stability