Credit supply, flight to quality and evergreening:

Analysis of bank-firm relationships after Lehman
by Ugo Albertazzi and Domenico J. Marchetti
Bank of Italy, Economics, Research and International Relations
Working papers – Number 756 – April 2010

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„Abstract
This paper analyzes the effects of the financial crisis on credit supply by using highly detailed data on bank-firm relationships in Italy after Lehman’s collapse. We control for firms’ unobservable characteristics, such as credit demand and borrowers’ risk, by exploiting multiple lending.
We find evidence of a contraction of credit supply, associated to low bank capitalization and scarce liquidity. The ability of borrowers to compensate through substitution across banks appears to have been limited. We also document that larger lesscapitalized banks reallocated loans away from riskier firms, contributing to credit procyclicality.
Such ‘flight to quality’ has not occurred for smaller less-capitalized banks. We argue that this may have reflected, among other things, evergreening practices. We provide corroborating evidence based on data on borrowers‘ productivity and interest rates at bankfirm level.“

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Contents
1. Introduction
2. The analytical framework
3. Data

• 3.1 Data definition
• 3.2 Data sources

4. Evidence of capital-related contraction of credit supply

• 4.1 The main results
• 4.2 Robustness
• 4.3 Substitution across banks

5. Flight to quality and evergreening

• 5.1 Heterogeneity of credit supply restrictions across firms
• 5.2 Flight to quality: Heterogeneity across banks
• 5.3 Corroborating the ‘evergreening’ explanation
• 5.4 The role of credit scoring

6. Credit supply restrictions and relationship lending
7. Conclusions

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Tables and figures
Appendix I: Data sources, definition of variables and some descriptive statistics
Appendix II: Robustness
References

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PDF – [59 Seiten]

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Anmerkung
Was lernen wir daraus?
In einigen Euro-Ländern steigt an Anzahl notleidender Kredite, was Banken idR dazu veranlaßt, sich bei der Vergabe neuer Kreditengagements zurückzuhalten. Statt neue, produktive und innovative Unternehmen zu unterstützen, werden marode Unternehmen künstlich am Leben gehalten, weil latent toxische Kredite verlängert, statt abgeschrieben werden. In einigen Mitgliedstaaten sind es vor allem kleinere Institute, die dazu neigen, Kredite zu prolongieren, die vermutlich nicht oder nur teilweise zurückgeführt werden können. Damit werden Marktaustritte weniger produktiver Unternehmen aufgeschoben bzw. verhindert, was am Ende dieser Entwicklung den potentiellen Abschreibungsbedarf solcher Kreditgeber erhöht. – Danach ertönt der Ruf nach Hilfe vom Staat bzw. Steuerzahler um so lauter (!)

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Ihr Oeconomicus