Foreign Currency Loans – Demand or Supply Driven?


Brown, Martin ; Kirschenmann, Karolin ; Ongena, Steven



URL: http://www.snb.ch/n/mmr/reference/working_paper_20...
Dokumenttyp: Arbeitspapier
Erscheinungsjahr: 2011
Titel einer Zeitschrift oder einer Reihe: Swiss National Bank Working Papers
Band/Volume: 2011-2
Ort der Veröffentlichung: Zürich
ISSN: 1660-7716 , 1660-7724
Auflage: Version July 23, 2010
Sprache der Veröffentlichung: Englisch
Einrichtung: Fakultät für Betriebswirtschaftslehre > Sonstige - Fakultät für Betriebswirtschaftslehre
Fachgebiet: 330 Wirtschaft
Abstract: Motivated by concerns over foreign currency exposures of banks in Emerging Europe, we examine the currency denomination of business loans made in Bulgaria during the period 2003-2007. We analyze a unique dataset including information on the requested and granted currency for more than hundred thousand loans granted by one bank to sixty thousand different firms. This data set allows us to disentangle demand-side from supply-side determinants of foreign currency loans. We find that 32% of the foreign currency loans disbursed in our sample were actually requested in local currency by the firm. Our analysis suggests that the bank lends in foreign currency, not only to less risky firms, but also when the firm requests a long-term loan and when the bank itself has more funding in euro. These results imply that foreign currency borrowing in Eastern Europe is not only driven by borrowers who try to benefit from lower interest rates but also by banks hesitant to lend long-term in local currency and eager to match the currency structure of their assets and liabilities.




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