Nonbank Lending and Credit Cyclicality

105 Pages Posted: 18 Jun 2020 Last revised: 23 Dec 2023

See all articles by Quirin Fleckenstein

Quirin Fleckenstein

HEC Paris - Finance Department

Manasa Gopal

Georgia Institute of Technology - Scheller College of Business

German Gutierrez Gallardo

University of Washington, Michael G. Foster School of Business, Students

Sebastian Hillenbrand

Harvard University - Business School (HBS)

Date Written: June 17, 2020

Abstract

We study the contribution of banks and nonbanks to cyclical fluctuations in the supply of syndicated loans. We find that a reduction in nonbank lending explains most of the contraction in syndicated credit and the associated employment losses during the Global Financial Crisis, while banks' contribution is small. Looking over multiple cycles, nonbanks' credit supply is roughly three times more cyclical than banks', suggesting that nonbanks are the main drivers of syndicated lending cycles. A model in which government support stabilizes bank funding can explain the higher cyclicality of nonbanks.

Keywords: JEL Classification: G21, G23, E32, E44, G01 Nonbanks, banks, credit cyclicality, CLOs, leveraged lending, Great Recession

JEL Classification: G21, G23, E32, E44, G01

Suggested Citation

Fleckenstein, Quirin and Gopal, Manasa and Gutierrez Gallardo, German and Hillenbrand, Sebastian, Nonbank Lending and Credit Cyclicality (June 17, 2020). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3629232 or http://dx.doi.org/10.2139/ssrn.3629232

Quirin Fleckenstein

HEC Paris - Finance Department ( email )

France

Manasa Gopal (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://https://manasagopal.com/

German Gutierrez Gallardo

University of Washington, Michael G. Foster School of Business, Students

Box 353200
Seattle, WA 98195-3200
United States
6072204767 (Phone)

Sebastian Hillenbrand

Harvard University - Business School (HBS) ( email )

Boston, MA 02163
United States

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