Determinants Of Bank Lending Performance In Germany. Evidence From Credit File Data.

We empirically identify factors that can explain the financial performance of bank lending activities. We also analyze the individual bank’s evaluation of a loan’s risk. We use our results to test theoretical hypotheses on the impact of certain parameters on credit terms and distress probabilities. We find ratings act as an important factor in the bank’s lending policy. Ratings reflecting higher risks lead to higher interest rate premia. The findings on collateralization are less clear and do not fully support any of hypotheses that are advanced to describe the role of collateral and covenants in credit contracts.