Template-type: ReDIF-Paper 1.0
Author-Name: Martin Brown
Author-Name-First: Martin
Author-Name-Last: Brown
Author-Person: pbr129
Author-Name: Karolin Kirschenmann
Author-Name-First: Karolin
Author-Name-Last: Kirschenmann
Author-Name: Steven Ongena
Author-Name-First: Steven
Author-Name-Last: Ongena
Author-Person: pon1
Title: Foreign Currency Loans - Demand or Supply Driven? 
Abstract: Motivated by concerns over foreign currency exposures of banks in Emerging Europe, we examine the currency denomination of business loans made in Bulgaria during the period 2003-2007. We analyze a unique dataset including information on the requested and granted currency for more than hundred thousand loans granted by one bank to sixty thousand different firms. This data set allows us to disentangle demand-side from supply-side determinants of foreign currency loans. We find that 32% of the foreign currency loans disbursed in our sample were actually requested in local currency by the firm. Our analysis suggests that the bank lends in foreign currency, not only to less risky firms, but also when the firm requests a long-term loan and when the bank itself has more funding in euro. These results imply that foreign currency borrowing in Eastern Europe is not only driven by borrowers who try to benefit from lower interest rates but also by banks hesitant to lend longterm in local currency and eager to match the currency structure of their assets and liabilities.
Length: 56 pages
Creation-Date: 2011
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2011/working_paper_2011_02
File-Format: text/html
Number: 2011-02
Classification-JEL: G21, G30, F34, F37
Keywords: foreign currency debt, banking
Handle: RePEc:snb:snbwpa:2011-02