Recourse as Shadow Equity: Evidence from Commercial Real Estate Loans

We study the role that recourse plays in the commercial real estate loan contracts of the largest U.S. banks. We find that recourse is valued by lenders and is treated as a substitute for conventional equity. At origination, recourse loans have rate spreads that are at least 20 basis points lower and loan-to-value ratios that are around 3 percentage points higher than non-recourse loans. Dynamically, recourse affects loan modification negotiations by providing additional bargaining power to the lender. Recourse loans were half as likely to receive accommodation during the COVID-19 pandemic, and the modifications that did occur entailed a relatively smaller reduction in payments.

The Analysis of Property Loans Development in Indonesia

The property sector in Indonesia has an essential role in driving the national economy. The bank lending development to the property sector in April 2019 did not show significant growth and stagnant. This study analyzes the growth trend of property loans in Indonesia and estimates the factors that affect the number of housing loans (KPR) and apartment ownership loans (KPA) in Indonesia. The data used in this study are secondary data and time series. The analytical tools used in this research are trend and regression. The results showed that from 2020 to 2025, the property loan growth in Indonesia will still be sluggish. The condition is identified by construction loan which is expected to grow even though the increase is not too significant, real estate loan is still fluctuating, this is because in 2019 there was a decline in real estate loan growth of almost 50 percent from the previous year, and KPA and KPR are estimated to decline even though in nominal terms the number of KPR and KPA increases. The population number variable has a positive and significant effect on the number of KPR and KPA in Indonesia. The more the population, the more the number of KPR and KPA will increase. Meanwhile, the variables of economic growth and inflation in this study did not significantly affect the number of KPR and KPA.

The Pricing of European Non-Performing Real Estate Loan Portfolios

ZusammenfassungNon-performing loans (NPL), commonly referred to as loans in arrears for at least 90 days, have continuously been characterized as the top priority of the European Central Bank (ECB) and continue to attract central attention (ECB, 2018a,b). With the outbreak of the European debt crisis, the quality of banks’ assets had deteriorated in a manner that, despite robust economic recovery and a variety of regulatory efforts, NPL still today pose a threat to bank and thrift institutions. Against this backdrop, the European regulator requires banks to develop effective strategies for reducing NPL, to set up clear governance and to operate powerful work-out structures (ECB, 2017).

Debtholder Monitoring Incentives and Bank Earnings Opacity

We exploit exogenous legislative changes that alter the priority structure of different classes of debt to study how debtholder monitoring incentives affect bank earnings opacity. We present novel evidence that exposing nondepositors to greater losses in bankruptcy reduces earnings opacity, especially for banks with larger shares of nondeposit funding, listed banks, and independent banks. The reduction in earnings opacity is driven by a lower propensity to overstate earnings and is more pronounced among larger banks and in banks with more real estate loan exposure. Our findings highlight the importance of creditors’ monitoring incentives in improving the quality of information disclosure.