Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297353 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2913
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We show that public guaranteed loans (PGL) increase credit availability improving real effects, but private banks' incentives imply that weaker banks shift riskier corporate loans to taxpayers. We exploit credit register data during the COVID-19 shock in Spain, and a stylized model guides the empirics. Unlike non-PGL, banks provide more PGL to riskier firms in which banks have higher pre-crisis shares of firm total credit. Importantly, these effects are stronger for weaker banks. Results using firm(-bank) fixed effects and loan volume versus price information suggest a credit supply-driven mechanism. Moreover, exploiting exogenous variation across similar firms with differing PGL access, we confirm these findings, and we additionally show that PGL increases banks' overall lending and credit share, with positive effects for firm survival and investment.
Subjects: 
Banking
Private incentives
COVID-19
Public guarantees
Risk-shifting
JEL: 
G01
G21
G38
E62
H81
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6393-0
Document Type: 
Working Paper

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