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Bank Capital Requirements, Loan Guarantees and Firm Performance

Author

Listed:
  • Sergio Mayordomo

    (Banco de España)

  • Antonio Moreno

    (School of Economics and Business, University of Navarra)

  • Steven Ongena

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))

  • Maria Rodriguez-Moreno

    (Banco de España)

Abstract

This paper studies the effects of the bank capital requirements imposed by the European authorities in October 2011 on loan collateral and personal guarantees usage to enhance capital ratios. We use detailed information on the loan contracts granted by a representative Spanish bank and several subsidiaries to nonfinancial corporations around that date. We document that personal guarantees usage increases more than that of collateral, especially at subsidiaries with lower capital ratios. However, although the former type of guarantees demonstrably disciplined firms in their risk-taking before 2011, their subsequent overuse may have blunted their impact and may have even undermined firm performance and investment.

Suggested Citation

  • Sergio Mayordomo & Antonio Moreno & Steven Ongena & Maria Rodriguez-Moreno, 2019. "Bank Capital Requirements, Loan Guarantees and Firm Performance," Swiss Finance Institute Research Paper Series 19-28, Swiss Finance Institute, revised Jun 2019.
    • Handle: RePEc:chf:rpseri:rp1928
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2731833
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    Cited by:

    1. Fernando Tavares & Eulália Santos & Margarida Freitas Oliveira & Luís Almeida, 2024. "Determinants of Corporate Indebtedness in Portugal: An Analysis of Financial Behaviour Clusters," Risks, MDPI, vol. 12(6), pages 1-20, May.
    2. Bacchiocchi, Andrea & Calcagnini, Giorgio & Giombini, Germana, 2025. "Do bank hierarchies affect the use of guarantees?," Economics Letters, Elsevier, vol. 257(C).
    3. Charles A.E. Goodhart & Dimitrios P. Tsomocos & Xuan Wang, 2023. "Support for small businesses amid COVID‐19," Economica, London School of Economics and Political Science, vol. 90(358), pages 612-652, April.
    4. Ambrocio, Gene & Hasan, Iftekhar & Jokivuolle, Esa & Ristolainen, Kim, 2020. "Are bank capital requirements optimally set? Evidence from researchers’ views," Journal of Financial Stability, Elsevier, vol. 50(C).
    5. Bunderson, Stuart & Thakor, Anjan V., 2022. "Higher purpose, banking and stability," Journal of Banking & Finance, Elsevier, vol. 140(C).
    6. Zhang, Xuan & Zhang, Yongmin & Scheffel, Eric & Zhao, Yang, 2022. "A key driver for the mixed relationship between loan risk premiums and collateral: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 83(C).
    7. Ambrocio, Gene & Hasan, Iftekhar & Jokivuolle, Esa & Ristolainen, Kim, 2020. "Are bank capital requirements optimally set? Evidence from researchers’ views," Journal of Financial Stability, Elsevier, vol. 50(C).
    8. Olivier De Jonghe & Tong Zhao & Hans Degryse & Luc Laeven, 2025. "Collateral and credit," Working Paper Research 482, National Bank of Belgium.
    9. Marek, Philipp & Stein, Ingrid, 2022. "Basel III and SME bank finance in Germany," Discussion Papers 37/2022, Deutsche Bundesbank.
    10. Marco Celentani & Miguel García-Posada & Fernando Gómez Pomar, 2022. "Fresh start policies and small business activity: evidence from a natural experiment," Working Papers 2210, Banco de España.
    11. Song, Fenghua & Thakor, Anjan, 2022. "Ethics, capital and talent competition in banking," Journal of Financial Intermediation, Elsevier, vol. 52(C).

    More about this item

    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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