Procyclical leverage: Evidence from banks' lending and financing decisions

Alexander Schandlbauer, Özlem Dursun-de Neef

Publikation: Working paperForskningpeer review

Resumé

Middle-aged people have a higher demand for bank loans compared to other age groups and banks that are active in regions with more middle-aged residents are exposed to higher loan demand. This generates a geographically varying demand for loans. Using this variation, we show that banks increase their loan supply and expand their balance sheet with an increase in their loan demand. They finance this expansion mainly with debt. This leads to a decrease in their Tier 1 ratios and an increase in their leverage, i.e., leverage is procyclical. By differentiating between worse-and better-capitalized banks, we highlight the importance of bank capital in banks' lending and financing decisions.
OriginalsprogEngelsk
StatusAfsendt - 2019

Fingeraftryk

Lending decisions
Leverage
Financing decisions
Bank financing
Bank lending
Loans
Bank capital
Balance sheet
Debt
Age groups
Residents
Finance
Bank loans

Citer dette

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Procyclical leverage: Evidence from banks' lending and financing decisions. / Schandlbauer, Alexander; Dursun-de Neef, Özlem.

2019.

Publikation: Working paperForskningpeer review

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