DP15737 Who Lends Before Banking Crises? Evidence from the International Syndicated Loan Market

Author(s): Mariassunta Giannetti, Yeejin Jang
Publication Date: January 2021
Keyword(s): Credit Booms, Crises, foreign banks
JEL(s): F3, G21
Programme Areas: Financial Economics, International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15737

We show that foreign lenders and low market share lenders extend more credit in comparison to other lenders during lending booms leading to banking crises, but not during other credit expansions. Less established lenders also increase the amount of credit they extend to riskier borrowers, without asking for collateral or imposing covenants and higher interest rates. Our results suggest that taking lenders' characteristics into account could provide an indicator for how much risk an economy is accumulating and be a useful barometer for macroprudential policies.