Citation

Discussion Paper Details

Please find the details for DP15445 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures

Author(s): Mikel Bedayo, Gabriel Jiménez, José Luis Peydró and Raquel Vegas

Publication Date: November 2020

Keyword(s): bank failures, Credit cycles, Defaults, Lending standards, loan origination time and screening

Programme Area(s): Financial Economics and Monetary Economics and Fluctuations

Abstract: We show that loan origination time is key for bank lending standards, cycles, defaults and failures. We exploit the credit register from Spain, with the time of a loan application and its granting. When VIX is lower (booms), banks shorten loan origination time, especially to riskier firms. Bank incentives (capital and competition), capacity constraints, and borrower-lender information asymmetries are key mechanisms driving results. Moreover, shorter (loan-level) origination time is associated with higher ex-post defaults, also using variation from holidays. Finally, shorter precrisis origination time -more than other lending conditions- is associated with more bank-level failures in crises, consistent with lower screening.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15445

Bibliographic Reference

Bedayo, M, Jiménez, G, Peydró, J and Vegas, R. 2020. 'Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15445