TY  - UNPD
A1  - Altavilla, Carlo
A1  - Ellul, Andrew
A1  - Pagano, Marco
A1  - Polo, Andrea
A1  - Vlassopoulos, Thomas
T1  - Loan guarantees, bank lending and credit risk reallocation
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 672
N2  - We investigate whether government credit guarantee schemes, extensively used at the onset of the Covid-19 pandemic, led to substitution of non-guaranteed with guaranteed credit rather than fully adding to the supply of lending. We study this issue using a unique euro-area credit register data, matched with supervisory bank data, and establish two main findings. First, guaranteed loans were mostly extended to small but comparatively creditworthy firms in sectors severely affected by the pandemic, borrowing from large, liquid and well-capitalized banks. Second, guaranteed loans partially substitute pre-existing non-guaranteed debt. For firms borrowing from multiple banks, the substitution mainly arises from the lending behavior of the bank extending guaranteed loans. Substitution was highest for funding granted to riskier and smaller firms in sectors more affected by the pandemic, and borrowing from larger and stronger banks. Overall, the evidence indicates that government guarantees contributed to the continued extension of credit to relatively creditworthy firms hit by the pandemic, but also benefited banks’ balance sheets to some extent.
T3  - CFS working paper series - 672 
KW  - loan guarantees
KW  - bank lending
KW  - COVID-19 pandemic
KW  - substitution
KW  - credit risk
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/63372
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-633729
UR  - https://ssrn.com/abstract=3983612
N1  - Marco Pagano and Andrea Polo acknowledge financial support from the Einaudi Institute for Economics and Finance (EIEF).
IS  - November 2021
PB  - Center for Financial Studies
CY  - Frankfurt am Main
ER  -