Federal Dposit InsuranceCorporation• Center for Financial Researchh
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2011-05
Global Retail Lending in the Aftermath of the US Financial Crisis:
Distinguishing between Supply and Demand Effects
June 18, 2010
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2011-05
Global Retail Lending in the Aftermath of the US Financial Crisis:
Distinguishing between Supply and Demand Effects
June 18, 2010
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
Global Retail Lending in the Aftermath of the US Financial Crisis:
Distinguishing between Supply and Demand Effects
Manju Puri, † Jörg Rocholl,‡ and Sascha Steffen§
June 2010
Forthcoming: Journal of Financial Economics
This paper examines the broader effects of the U. S. financial crisis on global lending to retail
customers. In particular we examine retail ba nk lending in Germany using a unique dataset of
German savings banks during th e period 2006 through 2008 for whic h we have the universe of
loan applications and loans granted. Our experimental setting a llows us to distinguish between
savings banks affected by the U.S. financial cr isis through their holdings in Landesbanken with
substantial subprime exposure and un affected savings banks. The da ta enable us to distinguish
between demand and supply side effects of bank lending and find that the U.S. financial crisis
induced a contraction in the supply of retail lending in Germany. While demand for loans goes
down, it is not substantially different for the affe cted and non-affected banks. More importantly,
we find evidence of a significant supply side effect in that the affected banks reject substantially
more loan applications than non-affected banks. This result is particularly strong for smaller and
more liquidity-constrained banks as well as for mortgage as compared to consumer loans. We
also find that bank-depositor relationships help mitigate these supply side effects.
We thank Sanvi Avouyi-Dovi, Hans Degryse, Enrica Detragiache, Valeriya Dinger, Andrew Ellul, Mark
Flannery, Nils Friewald, Luigi Guiso, Andreas Hackethal, Victoria Ivashina, Michael Kötter, Hamid
Mehran, José-Luis Peydro, Harry Schmidt, Bill Schwer t (the Editor), Berk Sensoy, Phil Strahan, Marcel
Tyrell, Vikrant Vig, Mark Wahrenburg, an anonymous referee, as well as seminar participants at the 2010
WFA Meetings, 2010 FIRS Conference, 2010 IDC Conference, 2010 AFA Meetings, 2009 UniCredit
Conference in Rome, 2009 FDIC CFR Workshop , 2nd CEPR-EBC-UA Conference on Competition in
Banking Markets, 2009 ECB-CFS Research Network C onference, 2009 CEPR Meetings in Gerzensee,
Business Models in Banking Conference at Bocconi, FDIC 9th Annual Bank Research Conference, Recent
Developments in Consumer Credit and Payments Conference at Federal Reserve Bank Philadelphia,
German Finance Association Annual Meeting, Bruegel, Deutsche Bundesbank, Duke University, ESMT,
HEC Lausanne, Tilburg University, University of Amsterdam, University of Mannheim, and University
of North Carolina. We are grateful to the FDIC for funding and to the German Savings Bank Association
for access to data. Rocholl acknowledges support fro m Peter-Curtius Foundation. Steffen acknowledges
support from Deutsche Forschungsgemeinschaft (DFG).
† Duke University and NBER. Email: mpuri@duke.edu. Tel: (919) 660-7657.
Distinguishing between Supply and Demand Effects
Manju Puri, † Jörg Rocholl,‡ and Sascha Steffen§
June 2010
Forthcoming: Journal of Financial Economics
This paper examines the broader effects of the U. S. financial crisis on global lending to retail
customers. In particular we examine retail ba nk lending in Germany using a unique dataset of
German savings banks during th e period 2006 through 2008 for whic h we have the universe of
loan applications and loans granted. Our experimental setting a llows us to distinguish between
savings banks affected by the U.S. financial cr isis through their holdings in Landesbanken with
substantial subprime exposure and un affected savings banks. The da ta enable us to distinguish
between demand and supply side effects of bank lending and find that the U.S. financial crisis
induced a contraction in the supply of retail lending in Germany. While demand for loans goes
down, it is not substantially different for the affe cted and non-affected banks. More importantly,
we find evidence of a significant supply side effect in that the affected banks reject substantially
more loan applications than non-affected banks. This result is particularly strong for smaller and
more liquidity-constrained banks as well as for mortgage as compared to consumer loans. We
also find that bank-depositor relationships help mitigate these supply side effects.
We thank Sanvi Avouyi-Dovi, Hans Degryse, Enrica Detragiache, Valeriya Dinger, Andrew Ellul, Mark
Flannery, Nils Friewald, Luigi Guiso, Andreas Hackethal, Victoria Ivashina, Michael Kötter, Hamid
Mehran, José-Luis Peydro, Harry Schmidt, Bill Schwer t (the Editor), Berk Sensoy, Phil Strahan, Marcel
Tyrell, Vikrant Vig, Mark Wahrenburg, an anonymous referee, as well as seminar participants at the 2010
WFA Meetings, 2010 FIRS Conference, 2010 IDC Conference, 2010 AFA Meetings, 2009 UniCredit
Conference in Rome, 2009 FDIC CFR Workshop , 2nd CEPR-EBC-UA Conference on Competition in
Banking Markets, 2009 ECB-CFS Research Network C onference, 2009 CEPR Meetings in Gerzensee,
Business Models in Banking Conference at Bocconi, FDIC 9th Annual Bank Research Conference, Recent
Developments in Consumer Credit and Payments Conference at Federal Reserve Bank Philadelphia,
German Finance Association Annual Meeting, Bruegel, Deutsche Bundesbank, Duke University, ESMT,
HEC Lausanne, Tilburg University, University of Amsterdam, University of Mannheim, and University
of North Carolina. We are grateful to the FDIC for funding and to the German Savings Bank Association
for access to data. Rocholl acknowledges support fro m Peter-Curtius Foundation. Steffen acknowledges
support from Deutsche Forschungsgemeinschaft (DFG).
† Duke University and NBER. Email: mpuri@duke.edu. Tel: (919) 660-7657.