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- W2731263676 abstract "We use variation in banks' loan exposure to industries adversely affected by the oil price declines of 2014 to explore how they respond to a net worth shock. Using granular data obtained under the Fed's stress testing programs we show that exposed banks tightened credit on corporate lending and on mortgages that they would ultimately hold on their balance sheet. However, they expanded credit for mortgages to be securitized, particularly those that are government-backed. Thus, banks re-balance their portfolio so as to lower their average risk weight, rather than scaling back the size of their balance sheet, as looking at on-balance-sheet corporate or residential lending alone would suggest. These results show the importance of taking a cross-balance sheet perspective when examining bank behavior. In addition, in terms of the ultimate ‘credit channel’ to firms and households, we show precisely how borrowers substitute to alternative financing when banks they initially borrow from tighten credit. In showing that there was ultimately a minimal impact on borrowers' overall funding, we provide a benchmark for crisis-period studies, which typically find a powerful credit channel effect." @default.
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- W2731263676 date "2021-01-01" @default.
- W2731263676 modified "2023-10-02" @default.
- W2731263676 title "De-leveraging or de-risking? How banks cope with loss" @default.
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- W2731263676 doi "https://doi.org/10.1016/j.red.2020.06.014" @default.
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