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Bank credit standards

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  • Mitchell Berlin

Abstract

Banks' lending standards at times seem too stringent and at other times too lax. The pattern seems to indicate that banks lend more easily in good times but tighten credit standards in lean times. But such a lending pattern may also be attributable to changes in borrowers' default risk over the business cycle or changes in the demand for loans, which rises and falls with GDP. Is there a systematic reason why banks might be too lax or too stringent in their lending? Economists have proposed a number of models to explain a bank lending cycle, including changes in bank capital, competition, or herding behavior. In \\"Bank Credit Standards,\\" Mitchell Berlin discusses these models and the empirical evidence for each.

Suggested Citation

  • Mitchell Berlin, 2009. "Bank credit standards," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 1-10.
    • Handle: RePEc:fip:fedpbr:y:2009:i:q2:p:1-10
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/2009/q2/brq209_bank-credit-standards.pdf
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    Cited by:

    1. Chava, Sudheer & Gallmeyer, Michael & Park, Heungju, 2015. "Credit conditions and stock return predictability," Journal of Monetary Economics, Elsevier, vol. 74(C), pages 117-132.
    2. Athanasoglou, Panayiotis P. & Daniilidis, Ioannis & Delis, Manthos D., 2014. "Bank procyclicality and output: Issues and policies," Journal of Economics and Business, Elsevier, vol. 72(C), pages 58-83.

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