The Impact of Expanded Bank Powers on Loan Portfolios Decisions
52 Pages Posted: 2 Jun 2014 Last revised: 29 Jul 2018
Date Written: July 19, 2018
This study takes advantage of a natural experiment to trace out the supply-side effects of nontraditional assets on loan portfolios. The natural experiment centers on the recent accounting standards that require banks to transfer off-balance sheet securitized assets onto balance sheets, resulting in a negative exogenous shock to securitizer banks’ capital allocations. The estimations from simultaneous equation models reveal how banks, in response to the shock, reallocate loan portfolio compositions simultaneously in different loan sectors. The findings show that pre-existing risk exposures of nontraditional assets cause significant shifts in loan portfolio compositions, reducing credits in business and consumer loan sectors.
Keywords: Portfolio Decisions; Business Loan, Risk Overhang, Nontraditional Banking, Stakeholder Assets, Credit Supply
JEL Classification: G00, G01, G21, G24, G28
Suggested Citation: Suggested Citation