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BEGIN:VEVENT
UID:3614e05d6e72d6a5bcccf0aad51ad761
CATEGORIES:Seminars
CREATED:20211014T151745
SUMMARY:Lunch Seminar: Andrea Polo - LUISS, EIEF
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Loan Guarantees, Bank Lending and Credit Risk Reallocation" Carlo Altavilla
 , Andrew Ellul, Marco Pagano and Thomas Vlassopoulos\nAbstract:\nThis paper
  investigates whether government credit guarantee schemes, used extensively
  after the onset of the Covid-19 pandemic to support bank lending by shifti
 ng default risk to governments, led to substitution of non-guaranteed with 
 guaranteed credit, without leading to an increased supply of lending as int
 ended by the policymakers. In principle, such substitution may be driven by
  banks exploiting public guarantees as an opportunity to reduce their credi
 t risk exposure, or by viable and liquid firms exploiting them as a chance 
 to restructure their debt at lower rates – or a combination of the two. We 
 investigate this issue using a novel harmonized credit register dataset for
  the entire euro area, AnaCredit, matched with supervisory bank balance-she
 et data, and focus on the four largest euro area countries. We establish tw
 o main findings. First, guaranteed loans were mostly extended to small but 
 comparatively creditworthy firms operating in sectors severely affected by 
 the pandemic, and borrowing from large, liquid and well-capitalized banks. 
 This selection of guarantee recipients should have reduced bank-driven subs
 titution, by discriminating against the riskiest firms, as well as firm-dri
 ven substitution, by discriminating against firms in resilient sectors. Our
  second finding concerns the existence and extent of substitution as well a
 s its variation across firms and lenders. At firm level, guaranteed loans r
 esulted in some substitution of pre-existing non-guaranteed debt with guara
 nteed loans, with €1 of additional loan guarantees being associated, on ave
 rage, with a €0.13 reduction in pre-existing lending. The value of this ela
 sticity varies across countries, being lowest in France and highest in Spai
 n. For firms borrowing from multiple banks, the substitution arises from th
 e lending behavior of the bank extending guaranteed loans, whose drop in le
 nding is about 10 times as large as for other banks lending to the same fir
 m. Credit substitution was highest in the case of funding granted to riskie
 r and smaller firms operating in the more affected sectors, and borrowing f
 rom larger and stronger banks. Banking relationships attenuated credit subs
 titution. Similar estimates, though varying in magnitude, are obtained for 
 all countries analyzed. Overall, the evidence indicates that in the euro ar
 ea government guarantees contributed to the continued extension of credit t
 o relatively creditworthy firms hit by the pandemic, but also benefited the
  balance sheet of banks to some extent.\n
DTSTAMP:20260911T034510Z
DTSTART:20211022T130000Z
DTEND:20211022T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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