TY - JOUR
T1 - When banks venture beyond home turf
T2 - Consequences for loan performance
AU - Tanoue, Yuta
AU - Yamashita, Satoshi
N1 - Funding Information:
Y. Tanoue is a Research Fellow of the Japan Society for the Promotion of Science. The authors report no conflicts of interest. The authors alone are responsible for the content and writing of the paper.
Publisher Copyright:
© 2017 Infopro Digital Risk (IP) Limited.
PY - 2017/9
Y1 - 2017/9
N2 - 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.
AB - 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.
KW - Bank loan
KW - Credit risk
KW - Lending area
KW - Loss given default
KW - Probability of default
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U2 - 10.21314/JCR.2017.225
DO - 10.21314/JCR.2017.225
M3 - Article
AN - SCOPUS:85030117977
VL - 13
SP - 1
EP - 19
JO - Journal of Credit Risk
JF - Journal of Credit Risk
SN - 1744-6619
IS - 3
ER -