Global Retail Lending in the Aftermath of the US Financial Crisis: Distinguishing between Supply and Demand Effects

52 Pages Posted: 2 May 2009 Last revised: 15 Jun 2010

See all articles by Manju Puri

Manju Puri

Duke University - Fuqua School of Business; NBER; FDIC

Jörg Rocholl

ESMT European School of Management and Technology

Sascha Steffen

Frankfurt School of Finance & Management

Multiple version iconThere are 3 versions of this paper

Date Written: June 15, 2010

Abstract

This paper examines the broader effects of the U.S. financial crisis on global lending to retail customers. In particular we examine retail bank lending in Germany taking advantage of a unique dataset of German savings banks over the period 2006-2008 for which we have the universe of loan applications and loans granted in this time period. Our experimental setting allows us to distinguish between those savings banks affected by the U.S. financial crisis, through their holdings in Landesbanken with substantial subprime exposure, and unaffected savings banks. We are further able to distinguish between demand and supply side effects of bank lending and find that the U.S. financial crisis induced a contraction in the supply of retail lending in Germany. While demand for loans goes down it is not substantially different for the affected and non-affected banks. We find evidence that the affected banks reject substantially more loan applications than non-affected banks. This effect is particularly strong for smaller and more liquidity-constrained banks as well as for mortgage as compared to consumer loans. We also find that bank-depositor relationships help mitigate these supply side effects.

Suggested Citation

Puri, Manju and Rocholl, Joerg and Steffen, Sascha, Global Retail Lending in the Aftermath of the US Financial Crisis: Distinguishing between Supply and Demand Effects (June 15, 2010). Available at SSRN: https://ssrn.com/abstract=1397557 or http://dx.doi.org/10.2139/ssrn.1397557

Manju Puri

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

FDIC ( email )

550 17th Street NW
Washington, DC 20429
United States

Joerg Rocholl

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin
Germany

HOME PAGE: http://www.esmt.org/en/159244

Sascha Steffen (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee
32-34
Frankfurt, 60322
Germany
16097326929 (Phone)

HOME PAGE: http://www.sascha-steffen.de

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