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How to measure lending policy stance of commercial banks?

Author

Listed:
  • Ewa Wróbel

    (Narodowy Bank Polski)

Abstract

Basing on the notion that “true” changes in credit standards set by commercial banks are these which do not result from a variation in the Net Present Value (NPV) of a loan, we suggest a method to verify whether the currently observed lending standards are too tight (soft). In this aim we use (S)VAR models which employ macroeconomic data and information contained in the Senior Loan Officer Opinion Survey. We argue that forecasts of credit standards obtained from these models may be identified with the level of standards congruent with the NPV. If actual credit standards systematically differ from forecasts, they provide a signal of a potential development of a credit cycle.

Suggested Citation

  • Ewa Wróbel, 2019. "How to measure lending policy stance of commercial banks?," NBP Working Papers 317, Narodowy Bank Polski, Economic Research Department.
  • Handle: RePEc:nbp:nbpmis:317
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    File URL: http://www.nbp.pl/publikacje/materialy_i_studia/317_en.pdf
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    Keywords

    lending standards; Net Present Value; (S)VAR models;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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