Multi-bank loan pool contracts

EFM classification: 330, 350
We show that multi-bank loan pools improve the risk-return profile of banks’ loan business. Banks write simple contracts on the proceeds from pooled loan portfolios, taking into account the free-rider problems in joint l
We show that multi-bank loan pools improve the risk-return profile of banks’ loan business. Banks write simple contracts on the proceeds from pooled loan portfolios, taking into account the free-rider problems in joint loan production. Thus, banks benefit greatly from diversifying credit risk while limiting the efficiency loss due to adverse incentives. We present calibration results that the formation of loan pools reduce the volatility in default rates, proxying for credit risk, of participating banks’ loan portfolios by roughly 70% in our sample. Under reasonable assumptions, the gain in return on equity (in certainty equivalent terms) is around 20 basis points annually.
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Metadaten
Author:Andreas Gintschel, Andreas Hackethal
URN:urn:nbn:de:hebis:30-5956
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 129
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (129)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2004
Year of first Publication:2004
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/04/11
SWD-Keyword:Kreditgeschäft / Unternehmenskooperation / Vertrag / Bank / Kreditrisiko / Rentabilität / Theorie
Pagenumber:31
Source:Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting ; 129
HeBIS PPN:128737166
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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