The Crisis as a Wake-Up Call: Do Banks Tighten Screening and Monitoring During a Financial Crisis‘

35 Pages Posted: 17 Feb 2009 Last revised: 10 Oct 2011

See all articles by Ralph De Haas

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); KU Leuven

Neeltje van Horen

Bank of England; Centre for Economic Policy Research (CEPR)

Date Written: July 2010

Abstract

To what extent was the credit contraction during the global financial crisis due to more intense screening and monitoring by banks‘ We address this question by analyzing changes in the structure of a large number of syndicated loans to private, non-financial corporations. We find an increase in retention rates among syndicate arrangers during the crisis that we cannot explain by borrower risk or interbank liquidity alone. This increased ‘skin in the game’ is especially pronounced when information asymmetries between the borrower and the lending syndicate – or within the syndicate – are high. This indicates that the reduction in bank lending during the crisis was at least partly caused by stricter bank screening and monitoring: a wake-up call.

Keywords: bank lending, financial crisis, loan retention, screening and monitoring, syndication

JEL Classification: D82, G15, G21

Suggested Citation

De Haas, Ralph and van Horen, Neeltje, The Crisis as a Wake-Up Call: Do Banks Tighten Screening and Monitoring During a Financial Crisis‘ (July 2010). Available at SSRN: https://ssrn.com/abstract=1343720 or http://dx.doi.org/10.2139/ssrn.1343720

Ralph De Haas (Contact Author)

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom

HOME PAGE: www.ebrd.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

KU Leuven

Naamsestraat 69
Leuven, B-3000
Belgium

Neeltje Van Horen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

HOME PAGE: http://https://www.bankofengland.co.uk/research/Researchers/neeltje-van-horen

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
363
Abstract Views
1,788
Rank
150,804
PlumX Metrics