3 Issuing costs of state guaranteed bonds - Financial Risk and ...

4 Impact of state guaranteed bonds on bank lending, funding and profitability performance
The bars below the top bar provide similar information for different percentiles of balance sheet
expansion. So, for instance, a bank in the 90 th percentile expanded its balance sheet more than at
least 90% of banks in the sample. The bottom bar describes the ratio of participating and nonparticipating
banks that were in the 90 th percentile (indicated by >0.9), and sequentially, the 75 th -
90 th percentile (indicated by 0.75-0.9), the 50 th -75 th percentile (indicated by 0.5-0.75), etc.
Overall, non-participating banks expanded their balance sheets by more than participating banks
over the period. This is particularly the case for the banks having expanded their balance sheet by
more than the median banks (i.e. top 50 th percentile) as non-participating banks outweigh
participating banks from the 50 th percentile upwards. However, the opposite holds in the case of
institutions having expanded their balance sheet by less than the median bank.
Figure 21: Balance sheet expansion for participating and non-participating banks, by percentile
98
Average
0.9
0% 20% 40% 60% 80% 100%
Non-participating Participating
Note: Balance sheet expansion measured as proportional expansion of net loans
Source: Bloomberg
Background
There is a large contemporary literature explaining patterns of lending through general conditions
in the banking sector and bank-specific factors. 20
This literature seeks to explain historical experience showing that problems in the banking system
lead to adverse credit conditions that are reflected in the real economy, as during the recent
financial crisis.
20 See de Bondt (1999) is the key study for Europe. In addition, see Favero et al. (1999), Kasyap and Stein (2000), Kishan and Opiela