IDEAS home Printed from https://ideas.repec.org/p/bde/wpaper/2437.html
   My bibliography  Save this paper

How do changes in financial reporting standards affect relationship lending?

Author

Listed:
  • Daniel Dejuan-Bitria

    (Banco de España)

  • Wayne R. Landsman

    (Banco de España)

  • Sergio Mayordomo

    (KENAN-FLAGLER BUSINESS SCHOOL, UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL)

  • Irene Roibás

    (Banco de España)

Abstract

This paper analyses the effect of the expected credit loss model under IFRS 9 on relationship lending in Spain. We document that relationship exclusivity between a bank and a firm has a positive effect on the growth of credit. However, this positive effect is significantly reduced after implementation of IFRS 9. We estimate that in 2018 the negative impact of IFRS 9 on relationship lending led to a reduction in credit to Spanish non-financial firms of 2.8% of their total outstanding credit, suggesting a sizeable effect on the availability of credit. For borrowers with Stage 1 loans, we show that the new regulation has a negative impact on relationship lending at firms with a higher probability of default and whose credit quality has deteriorated. Our findings are consistent with a change in the incentives that underpin relationship lending.

Suggested Citation

  • Daniel Dejuan-Bitria & Wayne R. Landsman & Sergio Mayordomo & Irene Roibás, 2024. "How do changes in financial reporting standards affect relationship lending?," Working Papers 2437, Banco de España.
    • Handle: RePEc:bde:wpaper:2437
    DOI: https://doi.org/10.53479/37892
    as

    Download full text from publisher

    File URL: https://www.bde.es/f/webbe/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/24/Files/dt2437e.pdf
    File Function: First version, October 2024
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.53479/37892?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Suarez, Javier & ,, 2018. "The Procyclicality of Expected Credit Loss Provisions," CEPR Discussion Papers 13135, C.E.P.R. Discussion Papers.
    2. Morais, Bernardo & Ormazabal, Gaizka & Peydro, J.L. & Roa, Monica & Sarmiento Paipilla, Miguel, 2020. "Forward Looking Loan Provisions : Credit Supply and Risk-Taking," Other publications TiSEM fe99a48f-f94a-41d8-bf3f-3, Tilburg University, School of Economics and Management.
    3. Germán López‐Espinosa & Gaizka Ormazabal & Yuki Sakasai, 2021. "Switching from Incurred to Expected Loan Loss Provisioning: Early Evidence," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 59(3), pages 757-804, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bischof, Jannis & Haselmann, Rainer & Kohl, Frederik & Schlueter, Oliver, 2022. "Limitations of implementing an expected credit loss model," LawFin Working Paper Series 48, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    2. Sehwa Kim & Seil Kim & Anya V. Kleymenova & Rongchen Li, 2023. "Current Expected Credit Losses (CECL) Standard and Banks' Information Production," Finance and Economics Discussion Series 2023-063, Board of Governors of the Federal Reserve System (U.S.).
    3. Tristan Brouwer & Job Huttenhuis & Ralph ter Hoeven, 2021. "Empirical results for expected credit losses of G-SIBs during COVID-19. The proof of the pudding is in the eating," Maandblad Voor Accountancy en Bedrijfseconomie Articles, Maandblad Voor Accountancy en Bedrijfseconomie, vol. 95(11-12), pages 381-396, December.
    4. Leonardo Villar-Gómez & Javier Gómez & Andrés Murcia Pabón & Wilmar Cabrera & Hernando Vargas, 2023. "The monetary and macroprudential policy framework in Colombia in the last 30 years: lessons learnt and challenges for the future," BIS Papers chapters, in: Bank for International Settlements (ed.), Central banking in the Americas: Lessons from two decades, volume 127, pages 87-112, Bank for International Settlements.
    5. Morais, Bernardo & Ormazabal, Gaizka & Peydro, J.L. & Roa, Monica & Sarmiento Paipilla, Miguel, 2020. "Forward Looking Loan Provisions : Credit Supply and Risk-Taking," Other publications TiSEM fe99a48f-f94a-41d8-bf3f-3, Tilburg University, School of Economics and Management.
    6. Degryse, Hans & Huylebroek, Cédric, 2023. "Fiscal support and banks’ loan loss provisions during the COVID-19 crisis," Journal of Financial Stability, Elsevier, vol. 67(C).
    7. Fabiani, Andrea & Piñeros, Martha López & Peydró, José-Luis & Soto, Paul E., 2022. "Capital controls, domestic macroprudential policy and the bank lending channel of monetary policy," Journal of International Economics, Elsevier, vol. 139(C).
    8. Bernd Engelmann & Ha Pham, 2020. "Measuring the Performance of Bank Loans under Basel II/III and IFRS 9/CECL," Risks, MDPI, vol. 8(3), pages 1-21, September.
    9. Miguel Resende & Carla Carvalho & Cecília Carmo, 2024. "Impacts of the Expected Credit Loss Model on Pro-Cyclicality, Earnings Management, and Equity Management in the Portuguese Banking Sector," JRFM, MDPI, vol. 17(3), pages 1-19, March.
    10. Fulvia Fringuellotti & Thomas Kroen, 2024. "Payout Restrictions and Bank Risk-Shifting," Staff Reports 1123, Federal Reserve Bank of New York.
    11. Wilmar Cabrera & Santiago Gamba & Camilo Gómez & Mauricio Villamizar-Villegas, 2022. "Examining Macroprudential Policy through a Microprudential Lens," Borradores de Economia 1212, Banco de la Republica de Colombia.
    12. Salazar, Yadira & Merello, Paloma & Zorio-Grima, Ana, 2023. "IFRS 9, banking risk and COVID-19: Evidence from Europe," Finance Research Letters, Elsevier, vol. 56(C).
    13. Vladimir Obradović & Milan Čupić & Dragomir Dimitrijević, 2024. "Financial reporting in times of crisis: The case of the Serbian developing economy during COVID-19," Australian Journal of Management, Australian School of Business, vol. 49(4), pages 722-739, November.
    14. Bischof, Jannis & Laux, Christian & Leuz, Christian, 2020. "Accounting for financial stability: Lessons from the financial crisis and future challenges," SAFE Working Paper Series 283, Leibniz Institute for Financial Research SAFE.
    15. Oľga Pastiranová & Jiří Witzany, 2021. "Ifrs 9 And It´S Behaviour In The Cycle: The Evidence On The Eu Countries," FFA Working Papers 3.003, Prague University of Economics and Business, revised 02 May 2021.
    16. Central Bank of Colombia, 2025. "Changes in the distribution of new loans by risk category throughout the post-pandemic credit cycle in Colombia," BIS Papers chapters, in: Bank for International Settlements (ed.), How can central banks take account of differences across households and firms for monetary policy?, volume 127, pages 73-102, Bank for International Settlements.
    17. Fang Du & Diana Hancock & Alexander H. von Hafften, 2022. "Are Incurred Loss Standards Countercyclical? A Case Study Using U.S. Bank Holding Company Data," JRFM, MDPI, vol. 15(3), pages 1-30, February.
    18. Mariya Gubareva, 2019. "Weight of the Default Component of CDS Spreads: Avoiding Procyclicality in Credit Loss Provisioning Framework," Complexity, Hindawi, vol. 2019, pages 1-19, July.
    19. Ren, Meixu & Ke, Konglin & Yu, Xin & Zhao, Jinxuan, 2023. "Local governments' economic growth target pressure and bank loan loss provision: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 1-14.
    20. Bischof, Jannis & Laux, Christian & Leuz, Christian, 2021. "Accounting for financial stability: Bank disclosure and loss recognition in the financial crisis," Journal of Financial Economics, Elsevier, vol. 141(3), pages 1188-1217.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:2437. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España (email available below). General contact details of provider: https://edirc.repec.org/data/bdegves.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.