Regulators vs. markets: Do differences in their bank risk perceptions affect lending terms?

Manthos Delis (), Suk-Joong Kim (), Panagiotis Politsidis and Eliza Wu

MPRA Paper from University Library of Munich, Germany

Abstract: We quantify the differences between market and regulatory assessments of bank portfolio risk, showing that larger differences significantly reduce corporate lending rates. Specifically, to entice borrowers, banks reduce spreads by approximately 4.1% following a one standard deviation increase in our measure for bank asset-risk differences. This amounts to an interest income loss of USD 1.95 million on a loan of average size and duration. The separate effects of market and regulatory risk are much less potent. Our study reveals a disciplinary-competition effect in favor of corporate borrowers when there is information asymmetry between investors and bank regulators.

Keywords: bank portfolio risk; markets vs. regulators; syndicated loans; cost of credit; market discipline; competition (search for similar items in EconPapers)
JEL-codes: G2 G21 G33 (search for similar items in EconPapers)
Date: 2020-02-08
New Economics Papers: this item is included in nep-ban and nep-rmg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/98548/1/MPRA_paper_98548.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98548

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().