The Crisis as a Wake-Up Call : Do Banks Tighten Screening and Monitoring During a Financial Crisis‘

To what extent was the credit contraction during the global financial crisis due to more intense screening and monitoring by bankslsquo; We address this question by analyzing changes in the structure of a large number of syndicated loans to private, non-financial corporations. We find an increase in retention rates among syndicate arrangers during the crisis that we cannot explain by borrower risk or interbank liquidity alone. This increased lsquo;skin in the game' is especially pronounced when information asymmetries between the borrower and the lending syndicate ndash; or within the syndicate ndash; are high. This indicates that the reduction in bank lending during the crisis was at least partly caused by stricter bank screening and monitoring: a wake-up call