Heider | Jotup

What drives banks’ credit standards? An analysis based on a large bank-firm panel

Retrieved on:

Wednesday, February 7, 2024

NPL, Seven Bank, Xi, Name, AnaCredit, Data, Bank, ECB, SAFE, JEL, Bias, Knowledge, XB, P50, Ciccarelli, Credit, Regression analysis, Shock, Central bank, Mand, E51, Movement, E44, SNL, Government, Access, Environment, Literature, P90, BLS, P25, CDS, Darst, Risk, European Central Bank, Bureau van Dijk, OBS, Probability, Complementarity, ROA, Policy, COVID-19, Research, Standard score, Uncertainty, R2, Heider, E52, Holmström, CSB, Health, P75

An analysis based on a large

Key Points:

An analysis based on a large
bank-firm panel
No 2902

Disclaimer: This paper should not be reported as representing the views of the European Central Bank
(ECB).
We find
that weaker capitalised banks adjust their credit standards more than healthier banks, especially for
firms with a higher default risk.
Here we find t hat w eaker b anks r espond m ore f orcefully by
tightening their credit standards more than better capitalised banks.
On the contrary, weaker banks
may be more prone to adopt looser credit standards, with the aim of increasing their revenues.
To answer these questions, we analyse the determinants of banks? credit standards, i.e., their internal
guidelines or loan approval criteria applied when deciding on granting credit.
2 Altavilla
ECB Working Paper Series No 2902

2

area banks tighten their credit standards more when linked to riskier firms, measured via firms? leverage
and default risk.
We assess how euro area banks adjusted their credit standards in response to
the negative COVID-19 pandemic shock, after accounting for government support measures.
When deciding on their credit standards, banks assess risks
based on both their own loss absorption capacity and the credit risk of their borrowers.
On the contrary,
weaker banks may be more prone to adopt looser credit standards, with the aim of increasing their
revenues.
We provide evidence that
euro area banks tighten their credit standards more when linked to riskier firms, measured via firms?
leverage and default risk based on the Altman Z-score.
In
addition, they focus on a different research question and use data from the IBLS only as a control.
ECB Working Paper Series No 2902
5

capital position implies less tightening of lending criteria, possibly reflecting the fact that banks can
afford to adjust their credit standards more moderately.
Based on our results, this implies a stronger deterioration of their lending conditions compared
with less vulnerable firms.
We assess how euro area banks adjusted their credit standards in response to
the negative COVID-19 pandemic shock, after accounting for government support measures.
This is in line with the role of government support
measures such as loan guarantees mitigating banks? exposure to firms? credit risks as they shield banks
from firms? increased credit risks.
2
Related literature

Our paper is closely related to studies analysing credit supply based on BLS indicators and the impact
of monetary policy shocks on bank lending conditions in the euro area.
Hempell and Kok (2010) disentangle
pure loan supply based on the BLS factors and investigate the role played by such factors for loan growth.
Several other studies link confidential individual BLS data with actual bank-level data, but not firm
data, allowing an analysis of bank characteristics relevant for bank lending conditions.
They find that a short-term interest rate shock decreases both loan supply
and demand, but more for less healthy banks.
Their findings are consistent with the results of our paper on the favourable impact of bank health on lending standards.
Both papers tend to find no evidence of higher risk taking of banks as a result
of accommodative monetary policy.
More recent studies are based on
confidential bank and firm-level data from national credit registers.
(2012) who focus on the bank-firm-relationship in Spain, based on credit register data.
Ferrero, Nobili, and Sene (2019) arrive at a corresponding conclusion on the risk-taking
channel based on a confidential loan-level dataset of Italian banks.
In another paper, Altavilla, Boucinha, and Bouscasse (2022)
disentangle credit demand and supply based on euro area credit register data (AnaCredit) for the period
of the pandemic.
Our results emphasise the
mitigating impact of government guarantees on a tightening of credit standards during the pandemic.
This mitigating impact played a major role in loan demand and not credit supply being decisive for lending volumes during the pandemic.
Based on their model, accommodative monetary policy is part of the optimal policy mix, combined with social insurance.
To keep the wealth of information
available in the BLS, we run our analysis at the quarterly frequency of the survey.
of employees
101.4

2456.9

2.0

4.0

12.0

37.0

116.0

14944589

Panel (a): Banks
Credit standards

Loan loss provisions
Panel (b): Firms

Notes: Descriptive statistics for the bank-firm sample included in the regression analysis.
Specifically, a one
standard deviation increase in the CET1 ratio leads to 0.2 standard deviations lower credit standards,
i.e., easier credit standards.
In their lending decisions, banks assess risks based on both their own
loss absorption capacity and the credit risk of their borrowers.
?Credit supply and monetary policy: Identifying the bank balance-sheet channel with loan applications.? American Economic
Review 102 (5):2301?2326.
?Hazardous times for monetary policy: What do twenty-three million bank loans say
about the effects of monetary policy on credit risk-taking?? Econometrica 82 (2):463?505.
?The credit cycle and the business cycle: new findings using
the loan officer opinion survey.? Journal of Money, Credit and Banking 38 (6):1575?1597.
guarantees: proxy from BLS, bank level
0

.1

.2

.3

.4

Government guarantees exposure

-.5

-.25

0

.25

.5

Government guarantees exposure

Notes: Based on results from columns (3) and (6) of Table 4.

Pandion Honors Industry Standouts at GOAT Awards During Premier’s Breakthroughs23

Retrieved on:

Friday, June 30, 2023

Consulting, Other Professional Services, Professional Services, Business, Growth, Pandion, Heider, Greatest of All Time, GOAT

In the majestic setting of Nashville’s Gaylord Opryland during Premier's Breakthrough23 event, Pandion Optimization Alliance held its first annual awards reception.

Key Points:

In the majestic setting of Nashville’s Gaylord Opryland during Premier's Breakthrough23 event, Pandion Optimization Alliance held its first annual awards reception.
The GOAT (Greatest Of All Time) Awards, held on June 21st, celebrated members, customers and partners who have demonstrated exceptional commitment and impact.
As a company, Pandion thrives on the collective power of many, a strength reflected in the diverse array of GOAT Award winners.
The GOAT Awards serve as a powerful testament to our collective strength and the shared accomplishments that drive us forward.

At Annual Meeting Pandion Celebrates Surpassing $1 Billion in Purchasing Volume

Retrieved on:

Thursday, June 15, 2023

Supply Chain Management, Consulting, Retail, Professional Services, Discovery, Inc., Upper crust, Heider, Premier, Inc., Acquisition, Group purchasing organization, CFO, Growth, GPO, Corporate title, NYSE, Education, Female, Management, Pandion

Pandion Optimization Alliance, a premier Group Purchasing Organization (GPO) harnessing the collective power of our customers for value and savings, celebrated significant milestones at their recent annual meeting.

Key Points:

Pandion Optimization Alliance, a premier Group Purchasing Organization (GPO) harnessing the collective power of our customers for value and savings, celebrated significant milestones at their recent annual meeting.
They proudly announced the achievement of $1.25 billion in purchasing volume, added two new board members and honored the remarkable 30-year tenures of two key senior executives, Karen Yacono and Jeanie Smith.
The accomplishment of the $1.25 billion volume goal was a notable highlight of the meeting.
Over this period Pandion experienced both robust organic and inorganic growth.

EQS-News: NFON AG: Patrik Heider becomes new Chairman of the Board of NFON AG

Retrieved on:

Monday, April 24, 2023

Financial Oversight and Management Board for Puerto Rico, Communication, CFOO, Supervisory board, Bavaria, TecDAX, Heider, Spokesperson, Nemetschek, Federal Executive Boards, CFO, Growth, MDAX, Konstanz University of Applied Sciences, Management

Munich, 24 April 2023 - The Supervisory Board of NFON AG has unanimously appointed Mr Patrik Heider as Chief Executive Officer of NFON AG with effect from 15 May 2023.

Key Points:

Munich, 24 April 2023 - The Supervisory Board of NFON AG has unanimously appointed Mr Patrik Heider as Chief Executive Officer of NFON AG with effect from 15 May 2023.
In this role, Patrik Heider will define the further strategic direction of NFON and lead the company into the next phase of growth and innovation.
"With Patrik Heider, we have been able to gain a highly experienced and international manager with exceptional leadership qualities as CEO.
Added to this is his excellent capital market experience, which is essential for the further development of NFON," says Rainer Koppitz, Chairman of the Supervisory Board of NFON AG.

Side effects of monetary easing in a low interest rate environment: reversal and risk-taking

Retrieved on:

Friday, November 11, 2022

Since 2014, the European Central Bank (ECB) and other central banks have been pursuing a negative interest rate policy (NIRP).

Key Points:

Since 2014, the European Central Bank (ECB) and other central banks have been pursuing a negative interest rate policy (NIRP).
The controversy about monetary policy in a low rate environment hinges on the existence of a zero-lower bound (ZLB) on interest rates (Coibion et al., 2012).
In a low or negative interest rate environment, it becomes harder for banks to pass on the reduction in the policy rate to their depositors.
This means a policy rate cut translates into a lower interest rate margin and reduces the net worth of banks.
In our recent paper (Heider and Leonello, 2021), we present a simple conceptual framework to show how a policy rate cut affects both bank lending and risk-taking in a low or negative interest rate environment versus a high interest rate environment.
The substitutability between loans, deposits and bonds is the channel through which the policy rate affects loan and deposit rates.
Reversal occurs when a cut in the monetary policy rate reduces lending instead of increasing it (Brunnermeier and Koby, 2018).
The level of the policy rate at which lending is maximal identifies the reversal rate.
Reversal is related to but not directly triggered by reduced profits from a contraction in the net interest margin at the ZLB.
This implies that when the policy rate falls below the reversal rate, a policy rate cut leads to increased risk-taking.
With market power, an increase in the lending volume reduces the loan rate, which then further reduces the benefit from screening.
Our research suggests that there are potential side effects of monetary stimulus in a low interest rate environment: reduced lending and increased risk-taking by banks.

Low rates and bank stability: the risk of a tipping point

Retrieved on:

Friday, November 11, 2022

This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.

Key Points:

This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.
It develops a model closely based on Allen and Gale (1998) and shows the existence of a critical policy rate level, dubbed the tipping point.
Past the tipping point, an interest rate cut has a negative net effect on bank capital and may indeed result in bank insolvency.
From the model, we learn which bank characteristics matter for the tipping point and how they affect it.
Using these theoretical results, we can use data on banks to quantify the tipping point.
To discuss bank solvency, we need to understand what constitutes the assets of a bank from an economic point of view.
A banks deposit franchise, which is generally not capitalised on bank balance sheets, is also a relevant bank asset.
With this concept of solvency in mind, the question becomes: what is the effect of a low policy rate on bank assets?
Past the tipping point, the deposit-franchise effect dominates and a policy rate cut hurts bank solvency.
Our observed value for average bank asset maturity (4.5 years) implies that a 0.55% policy rate is the tipping point.
[4]
More work is required to obtain a sound quantification of the tipping point, also for the euro area.

Monetary and macroprudential policies: trade-offs and interactions

Retrieved on:

Friday, November 11, 2022

Hence, macroprudential policies should be used appropriately to manage the balance between deeper recessions and longer-term benefits for economic growth.

Key Points:

Hence, macroprudential policies should be used appropriately to manage the balance between deeper recessions and longer-term benefits for economic growth.
Generally, the instruments of monetary policy and macroprudential policy both operate through the financial system.
For instance, Van der Ghote (2021) argues that (conventional) monetary policy interventions and macroprudential policy interventions can both help to safeguard financial stability.
In this situation, the degree of monetary policy accommodation is key to smooth the negative effects of tighter macroprudential policy (see Chart 3).
Accommodative monetary policy is shown by the black solid line, a constrained monetary policy is shown by the red dashed line.
Macroprudential policy can also have an impact on the transmission of monetary policy.
The interaction of monetary policy and macroprudential policy also affects bank lending, resulting in strong complementarity between the two policies (see Altavilla, Laeven and Peydr, 2020).
The effects of monetary policy easing on bank lending and risk-taking are greater when macroprudential policy is accommodative and are particularly strong for less capitalised banks.
Overall, monetary and macroprudential policies cannot be considered in isolation, as their transmission channels give rise to significant spillovers.
The degree of monetary policy accommodation has an effect on the short-term impact of macroprudential policy and therefore on the macroprudential policy space.
Recent research developed within the ECB Research Task Force on monetary policy, macroprudential policy and financial stability shows that monetary and macroprudential authorities must take account of important trade-offs and interactions when deciding on policy actions.
Substantial progress has been made on developing practical frameworks of analysis to assess the costs and benefits of macroprudential and monetary policy interventions.

Daniel Heider of TTR Sotheby's International Realty Named to Washington Business Journal 40 Under 40 Class of 2022

Retrieved on:

Monday, August 15, 2022

Partner (business rank), CEO, Sotheby's International Realty, Growth, National Symphony Orchestra, Founder, Damianos Sotheby's International Realty, Time, American City Business Journals, Daniel, Management, Property management, Washington metropolitan area, Heider

WASHINGTON, Aug. 15, 2022 /PRNewswire-PRWeb/ -- TTR Sotheby's International Realty is pleased to announce Daniel Heider's placement in the Washington Business Journal's 40 Under 40 Class of 2022.

Key Points:

An annual award, the Washington Business Journal's 40 Under 40 highlights young leaders in the Washington Metropolitan Area who are regarded for their professional accomplishments, community leadership, and awards and milestones.
"It is an honor to receive such a special designation from the Washington Business Journal," says Heider, Executive Vice President at TTR Sotheby's International Realty and Founder of the Heider Group.
"We are so proud to have Daniel and his team as part of the TTR Sotheby's International Realty family," says David DeSantis, Partner at TTR Sotheby's International Realty and Managing Broker of TTR Sotheby's International Realty's Downtown, Washington, D.C. brokerage office.
TTR Sotheby's International Realty is regarded as one of the highest-performing real estate firms in the United States.

Predicting the ROI of an MBA: Creighton Business School Launches New Career Advising Platform

Retrieved on:

Thursday, October 14, 2021

Students receive a personalized prediction for their desired industry, based on how alumni with comparable career backgrounds and goals fared in the labor market.

Key Points:

Students receive a personalized prediction for their desired industry, based on how alumni with comparable career backgrounds and goals fared in the labor market.
The Heider College of Business is one of the first graduate schools of business to pilot the new program.
We help institutions measure the value created for incoming and returning students, while assisting them in securing industry partnerships that lead students seamlessly into high-demand career pathways.
Institutions partner with AstrumU to drive enrollment and increase alumni and corporate engagement, while extending economic mobility opportunities inclusively to all learners.