Bank Behavior with Access to Credit Risk Transfer Markets

B.V.G. Goderis, I. Marsh, J. Vall Castello, W.B. Wagner

Research output: Working paperDiscussion paperOther research output

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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 analyze the effect that access to these markets has had on the lending behavior 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.Our findings confirm the general efficiency enhancing implications of new risk management techniques in a world with frictions suggested in the theoretical literature.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages29
Volume2006-100
Publication statusPublished - 2006

Publication series

NameCentER Discussion Paper
Volume2006-100

Fingerprint

Access to credit
Credit risk transfer
Loans
Management techniques
Partial adjustment
Credit derivatives
Credit risk management
Friction
Financial markets
Risk management
Obligation
Innovation
Lending
Credit

Keywords

  • credit risk transfer
  • risk management
  • bank lending

Cite this

Goderis, B. V. G., Marsh, I., Vall Castello, J., & Wagner, W. B. (2006). Bank Behavior with Access to Credit Risk Transfer Markets. (CentER Discussion Paper; Vol. 2006-100). Tilburg: Macroeconomics.
Goderis, B.V.G. ; Marsh, I. ; Vall Castello, J. ; Wagner, W.B. / Bank Behavior with Access to Credit Risk Transfer Markets. Tilburg : Macroeconomics, 2006. (CentER Discussion Paper).
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Goderis, BVG, Marsh, I, Vall Castello, J & Wagner, WB 2006 'Bank Behavior with Access to Credit Risk Transfer Markets' CentER Discussion Paper, vol. 2006-100, Macroeconomics, Tilburg.

Bank Behavior with Access to Credit Risk Transfer Markets. / Goderis, B.V.G.; Marsh, I.; Vall Castello, J.; Wagner, W.B.

Tilburg : Macroeconomics, 2006. (CentER Discussion Paper; Vol. 2006-100).

Research output: Working paperDiscussion paperOther research output

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Goderis BVG, Marsh I, Vall Castello J, Wagner WB. Bank Behavior with Access to Credit Risk Transfer Markets. Tilburg: Macroeconomics. 2006. (CentER Discussion Paper).