Fax +49 69 1344 6000 Telex 411 144 ecb d All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. 3 Contents Executive summary 5 Introduction 7 1 Banks' margin developments 7 1.1 Main observations 13 1.2 Factors affecting banks' margins 14 1.3 Conclusion of the section 17 2 Reasons for changes in the competitive environ...

This paper presents a novel model of the lending process that takes into account that loan officers must spend time and effort to originate new loans. Besides generating predictions on loan officers’ compensation and its interaction with the loan review process, the model sheds light on why competition could lead to excessively low lending standards. We also show how more intense competition ma...

Using confidential loan officer survey data on lending standards and internal risk ratings on loans, we document an effect of large-scale asset purchase programs (LSAPs) on lending standards and risk-taking. We exploit cross-sectional variation in banks’ holdings of mortgage-backed securities to show that the first and third round of quantitative easing (QE1 and QE3) significantly lowered lendi...

Purpose The aim of this practice briefing is to provide clarity on property valuations provided for secured lending. principal basis valuation market value but there confusion when and where it appropriate or inappropriate a with an assumption restricted marketing period, sometimes referred as “forced sale”. This examines the nature problem steps which valuer can take advice consistent standard...

I develop an overlapping-generations framework in which changes in lending standards generate endogenous cycles. In my economy, entrepreneurs who are privately informed about the quality of their projects need to borrow funds. Intermediaries screen entrepreneurs both through the amount of investment undertaken and through the level of entrepreneurial net worth. I show that endogenous regime swi...

We study a controlled corporate experiment in which loan officers was altered from fixed salary to volume-based pay. The incentives increased aggressiveness of origination: higher origination rates (+31%), loan sizes (+15%), and default rate (+28%). The effects are partly driven by moral hazard: approval decision is driven by loan officers’ discretion; however, default is uncorrelated with disc...