When Losses Turn into Loans: The Cost of Weak Banks

• 成果类型: Article
• 署名作者: Blattner, Laura; Farinha, Luisa; Rebelo, Francisca
• 署名单位: Stanford University; Banco de Portugal; Boston College
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20190149
• 发表日期: 2023
• 页码: 1600-+
• 关键词: aggregate productivity; Capital requirements; financial frictions; misallocation; allocation; credit; POLICY

摘要

We provide evidence that banks distort the composition of credit sup-ply in order to comply with ratio-based capital requirements in times of economic distress. An unexpected intervention by the European Banking Authority provides a natural experiment to study how banks respond to falling below minimum required capital ratios during an economic downturn. We show that affected banks respond by cut-ting lending but also by reallocating credit to distressed firms with underreported loan losses. We develop a method to detect underre-ported losses using loan-level data. The credit reallocation leads to a reallocation of inputs across firms. We calculate that the resulting increase in input misallocation accounts for about 22 percent of the decline in productivity in Portugal in 2012. (JEL E23, E32, G21, G28, G32, G38)