Who Pays for Financial Crises? Price and Quantity Rationing of Different Borrowers by Domestic and Foreign Banks

By Allen N. Berger, Tanakorn Makaew, Rima A Turk

July 10, 2018

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Allen N. Berger, Tanakorn Makaew, and Rima A Turk. Who Pays for Financial Crises? Price and Quantity Rationing of Different Borrowers by Domestic and Foreign Banks, (USA: International Monetary Fund, 2018) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Financial crises result in price and quantity rationing of otherwise creditworthy business borrowers, but little is known about the relative severity of these two types of rationing, which borrowers are rationed most, and the roles of foreign and domestic banks. Using a dataset from 50 countries containing over 18,000 business loans with information on the lender, the borrower, and contract terms, we find that publicly-listed borrowers are rationed more by prices or interest rates, whereas privately-held borrowers are rationed more by the number of loans. Also, the global financial crisis appears to have changed how banks price borrower risk. Further, there are important differences between foreign and domestic banks and between U.S. and non-U.S. loans.

Subject: Bank credit, Banking, Credit ratings, Financial crises, Financial institutions, Foreign banks, Loans, Money

Keywords: Bank credit, Borrower characteristic, Contract term, Credit ratings, Credit Rationing, Financial Crises, Foreign Banks, Global, Loan purpose, Loans, Private borrower, Public borrower, Relationship Lending, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/158
Stock No:

WPIEA2018158
ISBN:

9781484358191
ISSN:

1018-5941

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