Bank Capital Requirements, Loan Guarantees and Firm Performance

46 Pages Posted: 6 Jun 2019 Last revised: 9 Jun 2019

See all articles by Sergio Mayordomo

Sergio Mayordomo

Banco de España

Antonio Moreno

School of Economics and Business, University of Navarra

Steven Ongena

University of Zurich - Department of Banking and Finance; NTNU Business School; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)

Maria Rodriguez-Moreno

Banco de España

Multiple version iconThere are 2 versions of this paper

Date Written: April 13, 2019

Abstract

This paper studies the effects of the bank capital requirements imposed by the European authorities in October 2011 on loan collateral and personal guarantees usage to enhance capital ratios. We use detailed information on the loan contracts granted by a representative Spanish bank and several subsidiaries to nonfinancial corporations around that date. We document that personal guarantees usage increases more than that of collateral, especially at subsidiaries with lower capital ratios. However, although the former type of guarantees demonstrably disciplined firms in their risk-taking before 2011, their subsequent overuse may have blunted their impact and may have even undermined firm performance and investment.

Keywords: Banks, Asymmetric Information, Real Guarantees, Personal Guarantees, Risk Taking, Capital Requirements

JEL Classification: D43, E32, G21, G32

Suggested Citation

Mayordomo, Sergio and Moreno, Antonio and Ongena, Steven R. G. and Ongena, Steven R. G. and Rodriguez-Moreno, Maria, Bank Capital Requirements, Loan Guarantees and Firm Performance (April 13, 2019). Swiss Finance Institute Research Paper No. 19-28, Available at SSRN: https://ssrn.com/abstract=2731833 or http://dx.doi.org/10.2139/ssrn.2731833

Sergio Mayordomo (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Antonio Moreno

School of Economics and Business, University of Navarra ( email )

Ed. Amigos
Pamplona, Navarra 31009
Spain

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

NTNU Business School ( email )

Norway

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Maria Rodriguez-Moreno

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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