Abstract

http://ssrn.com/abstract=1488553
 
 

References (35)



 
 

Citations (2)



 


 



Do Banks Propagate Debt Market Shocks?


Galina Hale


Federal Reserve Bank of San Francisco

João A. C. Santos


Federal Reserve Bank of New York

March 24, 2010


Abstract:     
Over the years, U.S. banks have increasingly relied on the bond market to finance their business. This created the potential for a link between the bond market and the corporate sector whereby borrowers, including those that do not rely on bond funding, became exposed to the conditions in the bond market. We investigate the importance of this link.

Our results show that when the cost to access the bond market goes up, banks that rely on bond financing charge higher interest rates on their loans. Banks that rely exclusively on deposit funding follow bond financing banks and increase the interest rates on their loans, though by smaller amounts. Further, banks pass the bond market shocks predominantly to their risky borrowers that have access to the bond market and to their borrowers that do not have access to the bond market. These results show that banks propagate shocks to the bond market by passing them through their loan policies to their borrowers, including those that do not use bond financing.

Number of Pages in PDF File: 45

Keywords: Bank subdebt, bond spreads, lending channel, loan spreads

JEL Classification: E51, G21, G32.

working papers series





Download This Paper

Date posted: October 13, 2009 ; Last revised: March 25, 2010

Suggested Citation

Hale, Galina and Santos, João A. C., Do Banks Propagate Debt Market Shocks? (March 24, 2010). Available at SSRN: http://ssrn.com/abstract=1488553 or http://dx.doi.org/10.2139/ssrn.1488553

Contact Information

Galina Hale
Federal Reserve Bank of San Francisco ( email )
101 Market Street
San Francisco, CA 94105
United States
415-974-3131 (Phone)
415-974-2168 (Fax)
HOME PAGE: http://www.sf.frb.org/economics/economists/index.html
João A. C. Santos (Contact Author)
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)
HOME PAGE: HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML
Feedback to SSRN


Paper statistics
Abstract Views: 549
Downloads: 115
Download Rank: 146,217
References:  35
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.657 seconds