Bank Behaviour with Access to Credit Risk Transfer Markets

32 Pages Posted: 31 Aug 2007 Last revised: 30 Oct 2010

See all articles by Benedikt Goderis

Benedikt Goderis

The Netherlands Institute for Social Research|SCP

Ian W. Marsh

City University London - Sir John Cass Business School

Judit Vall Castelló

Universitat Pompeu Fabra - Center for Research in Health and Economics (CRES)

Wolf Wagner

Erasmus University Rotterdam (EUR)

Date Written: 2007

Abstract

One of the most important recent innovations in financial markets has been the development of credit derivative products that allow banks to more actively manage their credit portfolios than ever before. We analyse the effect that access to these markets has had on the lending behaviour of a sample of banks, using a sample of banks that have not accessed these markets as a control group. We find that banks that adopt advanced credit risk management techniques (proxied by the issuance of at least one collateralized loan obligation) experience a permanent increase in their target loan levels of around 50%. Partial adjustment to this target, however, means that the impact on actual loan levels is spread over several years.

Keywords: credit derivatives, bank loans, moral hazard

JEL Classification: G20, G21, G28

Suggested Citation

Goderis, Benedikt and Marsh, Ian William and Castelló, Judit Vall and Wagner, Wolf, Bank Behaviour with Access to Credit Risk Transfer Markets (2007). Available at SSRN: https://ssrn.com/abstract=1010101 or http://dx.doi.org/10.2139/ssrn.1010101

Benedikt Goderis

The Netherlands Institute for Social Research|SCP ( email )

Rijnstraat 50
The Hague, 2515
Netherlands

Ian William Marsh (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 5121 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/i.marsh

Judit Vall Castelló

Universitat Pompeu Fabra - Center for Research in Health and Economics (CRES) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Wolf Wagner

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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