When banks venture beyond home turf: Consequences for loan performance

Yuta Tanoue*, Satoshi Yamashita

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


Depopulation in provincial areas has recently caused a decline in regional economies in Japan. Japanese regional banks have thus been advancing into areas outside their original operational bases, especially into major cities and urban regions. Since lending to areas outside the original operational base is inherently more uncertain (and increasing), such lending behavior is expected to significantly affect the credit risk of regional banks’ lending portfolios. In this paper, we analyze the extent to which the lending area (the local region, outside the local region or Tokyo) affects the credit risk of regional banks. By using credit data on five regional banks, we develop credit risk estimation models to analyze the effect of the characteristics of lending area. These analyses indicate that the lending area variables affect credit risk; default is less likely to occur outside the local region and in Tokyo; and the loss given default is smaller in the local region than elsewhere.

Original languageEnglish
Pages (from-to)1-19
Number of pages19
JournalJournal of Credit Risk
Issue number3
Publication statusPublished - 2017 Sep
Externally publishedYes


  • Bank loan
  • Credit risk
  • Lending area
  • Loss given default
  • Probability of default

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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