Cross-subsidization of Bad Credit in a Lending Crisis /
We study the corporate-loan pricing decisions of a major Greek bank during the Greek financial crisis. A unique aspect of our dataset is that we observe both the interest rate and the "breakeven rate" of each loan, as computed by the bank's own loan-pricing department (in effect, the...
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- Elektronisch E-Book
- Sprache:
- Englisch
- Veröffentlicht:
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Cambridge, Mass.
National Bureau of Economic Research
2022.
- Zusammenfassung:
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We study the corporate-loan pricing decisions of a major Greek bank during the Greek financial crisis. A unique aspect of our dataset is that we observe both the interest rate and the "breakeven rate" of each loan, as computed by the bank's own loan-pricing department (in effect, the loan's marginal cost). We document that low-breakeven-rate (safer) borrowers are charged significant markups, whereas high-breakeven-rate (riskier) borrowers are charged small and sometimes even negative markups. We rationalize this de-facto cross-subsidization of riskier borrowers by safer borrowers through the lens of a dynamic model featuring depressed collateral values, impaired capital-market access, and limit pricing.
- Umfang:
- 1 online resource: illustrations (black and white);
- Anmerkungen:
- March 2022.
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