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Lending Conditions in EU: The Role of Credit Demand and Supply

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  • Svatopluk Kapounek

    (Mendel University in Brno, Czech Republic)

Abstract

We analyse the bank lending activity after the financial crisis and focus on bank-specific supply factors. Using a rich microeconomic dataset from Bankscope and macroeconomic shocks data, we employ OLS and 2SLS fixed effects models with banking controls, macroeconomic shocks and institutional quality. The banks’ loan-rate spreads increased despite the recent policy of low interest rates and quantitative easing. We use the bank asset quality as instruments to capture exogenous changes in loan supply. The empirical evidence shows that loan-rate spread and through this the supply of loans is negatively affected by a low asset quality and capital ratios.

Suggested Citation

  • Svatopluk Kapounek, 2017. "Lending Conditions in EU: The Role of Credit Demand and Supply," Working Papers 362, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    • Handle: RePEc:ost:wpaper:362
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    2. Saeed, Muhammad Yasir & Ramzan, Muhammad & Hamid, Kashif, 2020. "Causal and Dynamic Link Between the Banking Sector and Economic Growth in Pakistan," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 27(1).
    3. Jung, Alexander, 2020. "An empirical analysis of loan supply and demand in the euro area," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 187-201.
    4. Fidrmuc, Jarko & Degler, Moritz, 2021. "Temporal And Spatial Dependence Of Interregional Risk Sharing: Evidence From Russia," Macroeconomic Dynamics, Cambridge University Press, vol. 25(1), pages 178-200, January.
    5. Klára Baková, 2018. "The Financial Accelerator in Europe after the Financial Crisis," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 4(2), pages 143-155.
    6. Vidal-Tomás, David & Tedeschi, Gabriele & Ripollés, Jordi, 2020. "The desertion of rich countries and the mutual support of the poor ones: Preferential lending agreements among the PIGS," Finance Research Letters, Elsevier, vol. 34(C).
    7. Daniel Pastorek & Dajana Mazurkova, 2023. "The Heterogeneity of European Bank Lending and the Role of Economic Policy Uncertainty," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 71(3), pages 258-278, March.
    8. Jarko Fidrmuc & Svatopluk Kapounek, 2020. "The Risks and Financial Vulnerability of Foreign Bank Ownership in CEECs: Evidence from Exchange Rate Depreciation after the Financial Crisis," Eastern European Economics, Taylor & Francis Journals, vol. 58(1), pages 34-48, January.
    9. Florian Horky & Nicola Tretter & Jarko Fidrmuc, 2021. "Are the pandemic and innovation twins? Perceived financial obstacles, innovations, and entrepreneurial success," Economic Research Guardian, Weissberg Publishing, vol. 11(2), pages 236-254, December.
    10. Thaer Alhalabi & Vitor Castro & Justine Wood, 2023. "The relationship between excessive lending, risk premium and risk‐taking: Evidence from European banks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 448-471, January.
    11. Nguyen, Canh Phuc & Le, Thai-Ha & Su, Thanh Dinh, 2020. "Economic policy uncertainty and credit growth: Evidence from a global sample," Research in International Business and Finance, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    bank lending; loans; financial vulnerability; loan-rate spreads; institutions; macroeconomic shocks;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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