scholarly journals “Sorry, We're Closed” Bank Branch Closures, Loan Pricing, and Information Asymmetries*

2020 ◽  
Author(s):  
Diana Bonfim ◽  
Gil Nogueira ◽  
Steven Ongena
Keyword(s):  
Information Asymmetries ◽  
Loan Pricing ◽  
Loan Default ◽  
Bank Branch ◽  
Local Markets ◽  
Default Rate ◽  
Credit Granting

Abstract We study local loan conditions when banks close branches. In places where branch closures do not take place, firms that purposely switch banks receive a sixty-three basis points (bps) discount. However, after the closure of nearby branches of their credit-granting banks, firms that locally and hurriedly transfer to other banks receive no such discount. Yet, the loan default rate for the latter (more expensive) transfer loans is on average a full percentage point lower than that for the former (cheaper) switching loans. This suggests that transfer firms are of “better” quality than switching firms. In sum, even if local markets remain competitive, when banks close branches, firms lose.

scholarly journals One-factor model for default rates by loan type

Bankarstvo ◽  
2021 ◽  
Vol 50 (2) ◽  
pp. 88-100
Author(s):  
Miloš Božović
Keyword(s):  
Factor Model ◽  
Risk Measures ◽  
Loan Default ◽  
Macroeconomic Risk ◽  
Default Rates ◽  
Proposed Model ◽  
Default Rate ◽  
Systemic Component ◽  
Very High

This paper investigates the link between default rates by loan types and the systemic credit risk component. This link is described by a linear model that combines systemic and idiosyncratic contributions. The systemic component is a latent factor that depends directly on the aggregate loan default rate, while the idiosyncratic component drives specific variations of default rates across loan types. By transforming observable risk measures, the model can be econometrically represented as a mixed-effects model, where the systemic and idiosyncratic components represent, respectively, the slope and the intercept that are specific for each loan type individually. The proposed model is illustrated on a panel of defaulted loans of the Association of Serbian Banks. The obtained results show the model's very high power in explaining average default rates for all loan types. Thus, the aggregate default rate plays the role of a unique systemic component that mimics the influence of fundamental macroeconomic risk factors easily, without the necessity to model this relationship explicitly.

scholarly journals Exploring the sources of loan default clustering using survival analysis with frailty

2021 ◽  
Author(s):  
Enrique Bátiz-Zuk ◽  
Abdulkadir Mohamed ◽  
Fátima Sánchez-Cajal
Keyword(s):  
Survival Analysis ◽  
Default Risk ◽  
Banking Sector ◽  
Bank Loan ◽  
Expected Loss ◽  
Firm Level ◽  
Loan Default ◽  
Level Data ◽  
Default Rate ◽  
Systemically Important Banks

This paper investigates whether three microeconomic loan characteristics are sources of loan default clustering in the Mexican banking sector by employing survival analysis with frailty. Using a large sample of bank loan level data granted to micro, small and medium sized firms from January 2010 to 2018, we test whether classifying loans by the bank's systemic importance, industry or at individual firm level enhances the predictions of loans defaults. Our results show that loans granted by Domestic Systemically Important Banks contribute to the default clustering in micro and small firm loans. This is due to aggregate default rate levels and clusters that are large for these firms loans compared with loans provided to medium-sized firms. These findings have important implications for bank's expected loss management related to the correlated loan default risk

scholarly journals The Rise Of The Student As A Consumer Of Education

2013 ◽  
Vol 7 (1) ◽  
pp. 19
Author(s):  
Moe Shahdad
Keyword(s):  
College Education ◽  
Student Loan ◽  
Department Of Education ◽  
Loan Default ◽  
The Us ◽  
Student Loan Default ◽  
Default Rate

Data from the US Department of Education (2012) indicates that college education has become an expensive investment to the extent that an increasing number of students cannot pay for it, as they default on their loans. Student loan default rate have increased from 4.6% in 2005 to 9.1% in 2010.

scholarly journals DETERMINANTS OF AGRICULTURE-RELATED LOAN DEFAULT: EVIDENCE FROM CHINA

2020 ◽  
Vol 23 ◽  
pp. 129-150
Author(s):  
Zhichao Yin ◽  
Lei Meng ◽  
Yezhou Sha
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Firm Size ◽  
Ownership Structure ◽  
Loan Default ◽  
Logit Regression ◽  
Quality Rating ◽  
Default Rate ◽  
Managerial Quality ◽  
Insight Into

This paper investigates agriculture-related loan default in 2002–2009 through a largedata set from a leading Chinese state-owned bank. Using logit regression, we findthe default rate on agriculture-related loans is significantly higher than that on non–agriculture-related loans. We find that base interest rates, loan maturity, the typeof collateral, firm size, ownership structure, and managerial quality rating have asignificant impact on agriculture-related loan default, but this also depends on howagriculture-related loans are defined. The results provide insight into the real impactof monetary policy on agriculture-related lending.

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