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Collateral, type of lender and relationship banking as determinants of credit risk

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  • Gabriel Jiménez

    ()
    (Banco de España)

  • Jesús Saurina

    ()
    (Banco de España)

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    Abstract

    This paper analyses the determinants of the probability of default (PD) of bank loans. We focus the discussion on the role of a limited set of variables (collateral, type of lender and bank borrower relationship) while controlling for the other explanatory variables. The study uses information on the more than three million loans entered into by Spanish credit institutions over a complete business cycle (1988 to 2000) collected by the Bank of Spain's Credit Register (Central de Información de Riesgos). We find that collateralised loans have a higher PD, loans granted by savings banks are riskier and, finally, that a close bank borrower relationship increases the willingness to take more risk.

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/04/Fic/dt0414e.pdf
    File Function: First version, August 2004
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    Bibliographic Info

    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0414.

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    Length: 30 pages
    Date of creation: Aug 2004
    Date of revision:
    Handle: RePEc:bde:wpaper:0414

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    Related research

    Keywords: credit risk; probability of default; collateral; relationship banking; credit register;

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