Optimal Loan Interest Rate Contract Design

This paper analyzes optimal loan interest rate contracts under conditions of risky, symmetric information for one-period (static) and multi-period (dynamic) models. The optimal loan interest rate depends upon the volatility of, and co-variation among the market interest rate, borrower collateral, and borrower income, as well as the time horizon and the risk preferences of lenders and borrowers. For a risk-averse borrower with stochastic collateral, variable interest rate contracts are, in general, Pareto optimal. For plausible assumptions, the optimal loan interest rate for the multi-period model often exhibits muted responses to changes in market interest rates, making fixed rate loans a reasonable approximation for the optimal loan. Hence, in the absence of optimal contracts, long-term (short-term) borrowers tend to prefer fixed rate (variable) contracts.     

住房贷款违约风险定量分析初探

本首先剖析了影响住房贷款违约风险的主要因素，然后引入Merton的结构化模型来分析住房贷款在等额偿还方式下违约风险的度量问题，并从横向和纵向两个角度，通过模拟计算得出房价波动率和无风险利率对住房贷款的违约概率、预期损失和违约风险溢价的影响规律以及这三个指标在贷款期内的变化规律。     

Managing the risk of loan prepayments and the optimal structure of short term lending rates

Loan pricing is an extremely important aspect of bank operations because loans are typically over two-thirds of bank assets. Many researchers have analyzed the theoretical and empirical impact of how different factors should and do affect fixed rate loan rates and loan prepayments. However, a theoretical decision making model for maximizing expected profit in a declining rate environment has not been developed. After describing the conditions for the optimal loan rate, we develop numerical solutions for it under varying conditions. The varying conditions include the trend in interest rates, volatility of interest rates, and loan maturity. We thank Yen Low and Hamed Bagherpour for their assistance.     

Banks' option to lend,interest rate sensitivity,and credit availability

Interest rate risk is a major concern for banks because of the nominal nature of their assets and the asset-liability maturity mismatch. This paper proposes a new way to derive a bank's interest rate sensitivity, by examining separately the effects of interest rate changes on existing loans(loans-in-place) and potential loans (loans-in-process). A potential loan is shown to be equivalent to an American option to lend, and is valued using option theory. An increase in interest rates generally has a negative effect on existing loans. However, if both deposit and lending rates rise by the same amount, the value of a potential loan generally increases. Hence a bank's lending slack (or ratio of loans-in-process to loans-in-place) will determine its overall interest rate risk. Empirical evidence indicates that low-slack banks indeed have significantly more interest rate risk than high-slack banks. The model also makes predictions regarding the effect of deposit and lending rate parameters on bank credit availability. Empirical tests with quarterly data are generally supportive of these predictions. This revised version was published online in June 2006 with corrections to the Cover Date.     

Did quantitative easing reduce the borrowing costs of firms? The risk-taking channel

This paper examines the effect of the Federal Reserve's quantitative easing (QE) on the cost of bank loans and documents large heterogeneous effects across different firms. In QE1, the average loan spread is 22.7 percent lower compared to the non-QE period. This effect falls in QE2 and OT and then rises in QE3 and the tapering period. The rates of riskier loans are restrained more than less risky loans during QEs as banks take more risks by offering lower rates to attract risky borrowers. The Fed mortgage-backed securities purchases have a larger impact in narrowing the borrowing cost difference between riskier and safer loans than the Fed Treasury purchases. Our results are robust to borrower, year-quarter and bank fixed effects. Overall, our findings support that the risk-taking channel of QE plays a significant role in the corporate bank loan market.     

Screening, Bidding, and the Loan Market Tightness

Bank loans are more available and cheaper for new and small businesses inthe U.S. in concentrated banking areas than in competitive banking areas. Weexplain this anomaly by analyzing banks' decisions to screen projects andtheir competition in loan provisions. It is shown that, by exacerbating thewinner's curse, an increase in the number of banks can reduce banks'screening probability by so much that the number of banks that activelycompete in loan provisions falls and the expected loan rate rises. This isthe case when the screening cost is low, which induces all active bidders tobe informed. The opposite outcome occurs when the screening cost is high, inwhich case there are sufficiently many uninformed banks in bidding toattenuate the winner's curse. We also examine the social optimum     

小微企业不良贷款规模的影响因素分析

本文基于商业银行在2011—2013年间的相关小微贷款数据,从宏观和微观两个视角分析了影响小微企业不良贷款规模的因素。研究结论表明：居民消费价格指数、国民生产总值增长率、小微贷款的规模等都对小微企业不良贷款规模产生显著影响。该结论为我国商业银行完善小微贷款风险控制机制提供了借鉴。     

Relationship Banking, Fragility, and the Asset-Liability Matching Problem

We address a fundamental question in relationship banking: whydo banks that make relationship loans finance themselves primarilywith core deposits and when would it be optimal to finance suchloans with purchased money? We show that not only are relationshiploans informationally opaque and illiquid, but they also requirethe relationship between the bank and the borrower to endurein order for the bank to add value. However, the informationalopacity of relationship loans gives rise to endogenous withdrawalrisk that makes the bank fragile. Core deposits are an attractivefunding source for such loans because the bank provides liquidityservices to core depositors and this diminishes the likelihoodof premature deposit withdrawal, thereby facilitating the continuityof relationship loans. That is, we show that banks will wishto match the highest value-added liabilities with the highestvalue-added loans and that doing so simultaneously minimizesthe bank's fragility owing to withdrawal risk and maximizesthe value the bank adds in relationship lending. We also examinethe impact of interbank competition on the bank's asset-liabilitymatching and extract numerous testable predictions.     

Gold loans in the Australian gold mining industry: Do gold loans allow gold producers to increase leverage?

This paper tests the hypothesis that gold producers exhibit greater leverage where gold loans are used. As the choice of gold producers and the study period essentially avoids debt tax shield effects, the paper focuses on information asymmetry and agency costs explanations for leverage. Theory suggests hedging can reduce the cost of debt but it has little impact if management is not committed to adopting the promised hedging policy. The implicit hedge in gold loans commits management to hedging and so greater leverage is expected for producers adopting gold loans. Results from the analysis are consistent with this hypothesis.     

股票抵押贷款预期回收率比较分析

股票抵押贷款是一种风险较大的产品.股票价值和收益的高波动性造成抵押品价值的回收率不稳定,进而影响贷款预期回收率,使得银行经营风险加大.为了有效估算股票抵押贷款回收率,本文运用预期回收率模型,借助中国色诺芬股票数据库和美国CRSP股票数据库信息,比较分析不同市场情况下预期回收率的区别.分析发现中国市场由于近几年股票波动率加强,整体预期回收率较低,而美国则相反;预期回收率与抵押率、违约概率都成负相关关系,而且预期回收率对于抵押率的变化非常敏感;60%贷款抵押率的设定在美国市场是可行的,而中国市场合理抵押率是54%左右.     

Fixed‐ and Variable‐Rate Mortgages,Business Cycles,and Monetary Policy

This paper studies how the proportion of fixed‐ and variable‐rate mortgages affects business cycles and welfare. I develop and solve a New Keynesian dynamic stochastic general equilibrium model with a housing market and a group of constrained individuals who need housing collateral to obtain loans. The model predicts that with mostly variable‐rate mortgages, an exogenous interest rate shock has larger effects on borrowers than in a fixed‐rate economy. For plausible parameterizations, aggregate differences are muted by wealth effects on labor supply and by the presence of savers. For given monetary policy, a high proportion of fixed‐rate mortgages is welfare enhancing.     

The value of relationship banking: International evidence

This paper analyses whether repeated borrowing from the same bank affects loan contract terms. We find that relationship loans pay less spread and require less collateral compared to non-relationship loans. These effects for relationship loans are not derived from differences between relationship and nonrelationship loans. The reduction of interest rate spread for relationship loans disappeared during the financial crisis. The results also reveal that borrowers paid higher interest rate spreads, had to post more collateral and the maturity was shortened during the crisis period. The reduction in interest rate spread and collateral depends on the protection of creditors’ rights. In countries where creditors’ rights are well protected, relationship loans pay less spread and are required to post less collateral than relationship loans in countries with weak protection of creditors’ rights.     

Bank spread with uncertain deposit level and risk aversion

This paper derives a model of the banking firm under uncertainty and risk aversion. The selection of the bank's optimal spread between loan and deposit rates is emphasized. The model's results provide some implications for bank asset quality, capital regulation and deposit insurance. For example, it is shown that increases in the level of equity capital tend to increase the bank's spread under DARA. This implies an improvement in bank asset quality. On the other hand, as the deposit supply function becomes more volatile, the bank's spread narrows, which implies a decline in the quality of the bank's assets.     

Bank reputation, bank commitment, and the effects of competition in credit markets

This article discusses the effects of credit market competitionon a bank's incentive to keep its commitment to lend to a borrowerwhen the borrower's credit quality deteriorates. It is shownthat, unlike in the borrower's commitment problem to keep borrowingfrom the same bank in 'good' times, the increased competitionmay strengthen a bank's incentive to keep its commitment. Banksoffer loans with commitment to the highest quality borrowersbut, when faced with competition from bond markets, they alsogive these loans to lower quality borrowers. An increase inthe number of banks has a non-monotonic effect; new banks reinforcea bank's incentive only if there are a small number of banks.     

Further Evidence on the Determinants of Secured versus Unsecured Loans

Using a unique data set collected from financial statements of all Singapore listed firms from 1983 to 1991, we provide international evidence on the determinants of the amount of secured loans as a fraction of total secured and unsecured loans. This data set comprises a much wider range of firms than most previous studies. We show that consistent with the agency-cost hypothesis, firms with more growth opportunities use more secured loans. This is in contrast to the opposite result reported in Barclay and Smith (1995b) who measure secured debt as a fraction of total long-term fixed claims. We also find strong support for the hypothesis that smaller firms use more secured loans. In contrast, Leeth and Scott (1989), using survey data on small firms, find an insignificant firm size effect. Finally, we show that the use of secured loans is positively related to asset riskiness and loan size, and is negatively related to asset specificity. Firm quality has no explanatory power.     

论我国商业银行个人住房贷款的风险防范

2010年4月中央政府为遏制房价过快上涨陆续出台了多项严厉的调控政策,随着房地产市场不确定性逐步增加,商业银行原本安全性较高的个人住房贷款的风险也在逐渐加大.本文在此背景下分析了近年来我国商业银行个人住房贷款的发展情况、普遍存在的风险类型,并在此基础上对商业银行个人住房贷款的风险防范提出了相关对策.     

Exclusion,competition, and regulation in the retail loan market

Exclusion of borrowers from credit markets became a primary concern for regulators during the recovery from the recent recession. The paper analyzes loan-making institutions that set both interest rates and minimum credit requirements. We propose analytical measures of the degree of borrower exclusion from receiving loans. We analyze five market structures: Single lender, regulated interest rate, entry, interest rate discrimination, and highly-competitive lenders. Interest rate regulation improves total welfare relative to a single lender market. However, entry of a second lender reduces exclusion and generates higher total welfare. In the absence of fixed costs, perfect and Bertrand competition are optimal.     

Evergreening in banking

In the dynamic model of banking, a bank's option to hide its loan losses by rolling over non-performing loans is shown to worsen moral hazard. Contrary to the classic theory, moral hazard may arise even when a bank cannot seek a correlated risk for its loans. The loans seem to be performing and the bank makes a profit although it is de facto insolvent. When the bank's balance sheet includes hidden non-performing loans, the bank may optimally shrink lending or gamble for resurrection by growing aggressively. To eliminate this type of moral hazard, which is broadly consistent with evidence from emerging economies, a few regulatory implications are suggested.     

Corporate debt and unconventional monetary policy: The risk-taking channel with bond and loan contracts

We investigate the effects of unconventional monetary policies on corporate debt through the risk-taking channel using corporate bond and syndicated loan contracts from 2000 to 2016 in Japan. In this period, the policy rate remained fixed near the zero bound. Using the daily changes in the yield curve on monetary policy meeting days, we identify one call rate shock and two unconventional monetary policy shocks that do not affect short-term rates. We find that QE shocks, which move all medium-to-long-term rates, increase the maturity of debt contracts, especially for syndicated loans. In addition, such QE shocks decrease the size of corporate bonds with short maturity. On the other hand, QQE shocks, which raise medium-term rates and lower long-term rates, decrease the size of loans and corporate bonds with longer maturity. These effects imply the existence of the risk-taking channel of unconventional monetary policy: it stimulates investment in longer-maturity assets and decreases investment in assets with lower yields. Our findings show that unconventional policies affect debt contracts even in an extremely low interest rate environment.     

On stock-based loans

We investigate the equilibrium interest rate charges on non-recourse and recourse loans secured by stock. In such loans, the client retains the option to prepay and recover the collateral stock. We adopt a structural model of the firm where debt levels, with endogenous bankruptcy, affect equity dynamics. Complicating matters, the link between total equity and the price of a share of stock that forms the collateral depends on the extent of dilutions and buybacks that occur. For levered firms, due to dilution in bad states of nature, stock prices typically fall faster than equity values; and for firms that engage in buybacks in good states of nature, stock prices will rise faster than equity values. Banks that ignore these features underestimate the equilibrium interest rate charge on stock-based loans. We provide an analysis of individual stock-based loans and their portfolio characteristics, the latter of which can be used by banks to ascertain capital requirements.