Managing the credit risk inherent to a corporate credit line is similar to that of a term loan, but with one key difference. For both instruments, the bank should know the borrower's probability of default (PD) and the facility's loss given default (LGD). However, since a credit line allows the...

This paper compares alternative procedures to mitigate the procyclicality of the new risk-sensitive bank capital regulation (Basel II). We estimate a model of the probabilities of default (PDs) of Spanish firms during the period 1987-2008, and use the estimated PDs to compute the corresponding...

We analyze the impact of the countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Countercyclical ‘‘dynamic’’ provisioning that is unrelated to specific loan losses was introduced in Spain in 2000, and modified...

Asset securitization offers banks the possibility of altering their capital structures and the financial intermediation process. This study shows that the introduction of securitization is associated with fundamental changes in the funding policies of banks. In particular, we present evidence of...

We identify the effects of monetary policy on credit risk‐taking with an exhaustive credit register of loan applications and contracts. We separate the changes in the composition of the supply of credit from the concurrent changes in the volume of supply and quality, and the volume of demand....

A common assumption in the academic literature and in the supervision of banking systems is that franchise value plays a key role in limiting bank risk-taking. As market power is the primary source of franchise value, reduced competition in banking markets has been seen as promoting banking...

After a brief review of the literature on the determinants of financial development, the paper reviews the Asian and European financial systems in terms of their size and efficiency. It also compares the steps taken in the two regions in the quest for financial development and stability, which...

In this paper, we analyse the relationship between the Spanish business cycle and the capital buffers held by Spanish commercial and savings banks. We build an incomplete panel of Spanish institutions from 1986 to 2000 –thus covering a complete business cycle– and estimate an equation for...

This paper investigates the factors that determine the use of collateral in time series and cross-section data on the population of banks' loans to Spanish firms every year from 1984 to 2002 (over two million loans). Using the record of actual loan defaults of borrowers as a measure of credit...