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

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  • Jimenez, Gabriel
  • Saurina, Jesus

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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  • Jimenez, Gabriel & Saurina, Jesus, 2004. "Collateral, type of lender and relationship banking as determinants of credit risk," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2191-2212, September.
    • Handle: RePEc:eee:jbfina:v:28:y:2004:i:9:p:2191-2212
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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