The following MBA-Thesis analyses how the financial crisis has affected different pre-conditions for the credit lending behaviour of banks. Additionally the demand for loans of potential borrowers will be considered. A “credit crunch” is defined as a restriction of the credit supply which leads to a mismatch of supply and demand.
It will be shown that the financial crisis caused a still ongoing macroeconomic contraction. The macroeconomic contraction has a direct effect on the calculation of rating grades which downgrade. Parameters of credit risk assessments will be analysed and their pro-cyclicality will be tested. Corporate rating grades already downgraded significantly in 2008.
The downgrading of firms has an effect on the credit pricing which influences also the credit demand. This effect will be shown by explaining a basic cost-plus loan pricing model. The sensitivity of the loan pricing towards changes of attributed capital, refinancing costs and cost of default will be exemplarily shown. It will be shown that the rating downgrades have a significant effect on the credit price. This price increase which might affect the demand is however per definition not a “credit crunch”.
The Basel II Accord regulation links the requirements for banks’ capital to rating grades. Prior to the financial crisis the capital of banks has already been close to the regulatory minimum level. This made the banks vulnerable for impairments on assets. As new sources for capitalisation and possibilities to off-balance assets are currently limited banks have to reduce risk-weighted assets to fulfil the minimum capital requirements.
A reduction of risk-weighted assets could be inter alia done by a restrictive corporate lending policy. The restrictions on banks’ capital will not decrease quickly as especially impairments on the credit book might increase due to upcoming defaults.
Nevertheless a supply restriction gets only visible if the demand for credits is robust. The demand correlates among other points especially to the investments which have decreased since the end of 2008.
Inhaltsverzeichnis (Table of Contents)
- 1 INTRODUCTION
- 1.1 DESCRIPTION OF THE PROBLEM AND COURSE OF THE THESIS
- 1.2 FRAMEWORK
- 1.2.1 FINANCIAL CRISIS
- 1.2.2 CREDIT RATIONING AND IS-LM AS THEORETICAL MODELS
- 1.2.3 SMALL AND MEDIUM-SIZED ENTERPRISES IN GERMANY
- 1.2.4 GERMAN CREDIT BANKING SYSTEM
- 2 IMPACTS ON THE CORPORATE CREDIT DEMAND AND SUPPLY
- 2.1 DEMAND SIDE
- 2.1.1 BASEL 2, RATINGS AND REQUIRED CAPITAL ATTRIBUTION
- 2.1.2 MACROECONOMIC CONTRACTION AND DEVELOPMENT OF RATINGS
- 2.1.3 MACROECONOMIC CONTRACTION AND BORROWERS' BALANCE SHEETS
- 2.1.4 OTHER FACTORS THAT INFLUENCE - A LOAN PRICING MODEL
- 2.2 SUPPLY SIDE
- 2.2.1 AVAILABLE ECONOMIC CAPITAL
- 2.2.2 SECURIZATION OF BANK LOANS
- 2.2.3 ALTERNATIVE DEMAND AND MONETARY POLICY
- 3 EVIDENCE OF A CREDIT CRUNCH IN GERMANY
- 3.1 DEVELOPMENT OF THE TOTAL LENDING VOLUME IN GERMANY
- 3.2 ANALYSIS ON THE BASIS OF THE ECB BANK LENDING SURVEY
- 4 CONCLUSION
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis examines the potential credit crunch experienced by small and medium-sized enterprises (SMEs) in Germany following the global financial crisis of 2008. The work analyzes the impact of the crisis on both the demand and supply sides of the corporate credit market, exploring the role of factors such as Basel II regulations, macroeconomic contraction, and bank lending behavior.- Impact of the financial crisis on corporate credit demand and supply
- The role of Basel II regulations in influencing credit risk and capital allocation
- The impact of macroeconomic contraction on borrowers' balance sheets and rating agencies
- The interplay of bank lending behavior, available economic capital, and the securitization of bank loans
- Evidence of a credit crunch in Germany based on lending volume data and the ECB bank lending survey
Zusammenfassung der Kapitel (Chapter Summaries)
- Chapter 1: Introduction - This chapter sets the stage for the thesis, defining the problem of potential credit crunches for SMEs in Germany and outlining the framework for the analysis. It introduces the key concepts of the financial crisis, credit rationing, and the relevant macroeconomic and banking system characteristics in Germany.
- Chapter 2: Impacts on the Corporate Credit Demand and Supply - This chapter delves into the impact of the financial crisis on both the demand and supply sides of the corporate credit market. It examines the effects of Basel II regulations, macroeconomic contraction, and the specific circumstances of borrowers on credit demand. The supply side analysis focuses on factors such as available economic capital, securitization of bank loans, and the role of monetary policy.
- Chapter 3: Evidence of a Credit Crunch in Germany - This chapter presents empirical evidence regarding the potential credit crunch experienced by SMEs in Germany. The chapter analyzes the development of total lending volume and examines the findings of the ECB bank lending survey.
Schlüsselwörter (Keywords)
This thesis focuses on the impact of the 2008 financial crisis on the German credit market, particularly concerning the availability of credit for small and medium-sized enterprises (SMEs). Key themes include Basel II regulations, credit rationing, macroeconomic contraction, bank lending behavior, securitization of bank loans, and the analysis of lending volume data. The study provides insights into the potential credit crunch experienced by SMEs in Germany and its potential ramifications for the German economy.- Quote paper
- Christopher Heine (Author), 2009, Has the Financial Crisis Induced a Credit Crunch for Small and Medium-Sized Enterprises in Germany?, Munich, GRIN Verlag, https://www.grin.com/document/132485