Foreigners vs. Natives

Bank Lending Technologies and Loan Pricing

T.H.L. Beck, V. Ioannidou, L. Schäfer

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: Do domestic and foreign banks differ in their lending techniques and loan pricing models? Are such differences driven by different clienteles? Using a sample of firms that borrow from both domestic and foreign banks in the same month, we show significant differences in lending techniques and loan pricing. Foreign banks charge lower interest rates, but grant loans at a shorter maturity and are more likely to demand collateral than domestic banks. Foreign banks also base their pricing on credit ratings and collateral pledges, while domestic banks price according to length, depth and breadth of the relationship with the borrower. These findings confirm that foreign and domestic banks can cater to the same clientele but with different lending techniques: foreign banks with transaction-based and domestic banks with relationship-based lending techniques.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages39
Volume2012-055
Publication statusPublished - 2012

Publication series

NameCentER Discussion Paper
Volume2012-055

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Bank lending
Loan pricing
Foreign banks
Lending
Clientele
Loans
Credit rating
Maturity
Interest rates
Pricing
Charge

Keywords

  • Bank Financing
  • Foreign Ownership
  • Lending Technologies
  • Loan Pricing

Cite this

Beck, T. H. L., Ioannidou, V., & Schäfer, L. (2012). Foreigners vs. Natives: Bank Lending Technologies and Loan Pricing. (CentER Discussion Paper; Vol. 2012-055). Tilburg: Economics.
Beck, T.H.L. ; Ioannidou, V. ; Schäfer, L. / Foreigners vs. Natives : Bank Lending Technologies and Loan Pricing. Tilburg : Economics, 2012. (CentER Discussion Paper).
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Beck, THL, Ioannidou, V & Schäfer, L 2012 'Foreigners vs. Natives: Bank Lending Technologies and Loan Pricing' CentER Discussion Paper, vol. 2012-055, Economics, Tilburg.

Foreigners vs. Natives : Bank Lending Technologies and Loan Pricing. / Beck, T.H.L.; Ioannidou, V.; Schäfer, L.

Tilburg : Economics, 2012. (CentER Discussion Paper; Vol. 2012-055).

Research output: Working paperDiscussion paperOther research output

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AB - Abstract: Do domestic and foreign banks differ in their lending techniques and loan pricing models? Are such differences driven by different clienteles? Using a sample of firms that borrow from both domestic and foreign banks in the same month, we show significant differences in lending techniques and loan pricing. Foreign banks charge lower interest rates, but grant loans at a shorter maturity and are more likely to demand collateral than domestic banks. Foreign banks also base their pricing on credit ratings and collateral pledges, while domestic banks price according to length, depth and breadth of the relationship with the borrower. These findings confirm that foreign and domestic banks can cater to the same clientele but with different lending techniques: foreign banks with transaction-based and domestic banks with relationship-based lending techniques.

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Beck THL, Ioannidou V, Schäfer L. Foreigners vs. Natives: Bank Lending Technologies and Loan Pricing. Tilburg: Economics. 2012. (CentER Discussion Paper).