Philipp Schnabl

Financial Globalization and the Transmission of Bank Liquidity Shocks: Evidence from an Emerging Market

I exploit the 1998 Russian default as a negative liquidity shock to international banks and analyze its impact on Peru. I find that after the shock international banks reduce bank-to-bank lending to Peruvian banks and Peruvian banks reduce lending to Peruvian firms. The effect is strongest for domestically-owned banks that borrow internationally, intermediate for foreign-owned banks, and weakest for locally-funded banks. I control for credit demand by examining firms that borrow from several banks. These results suggest that bank-to-bank lending establishes an international transmission channel for liquidity shocks and that foreign bank ownership mitigates, rather than amplifies, the transmission through this channel.

The Role of Technology in Mortgage Lending

Technology-based (“FinTech�?) lenders increased their market share of U.S. mortgage lending from 2 percent to 8 percent from 2010 to 2016. Using market-wide, loan-level data on U.S. mortgage applications and originations, we show that FinTech lenders process mortgage applications about 20 percent faster than other lenders, even when controlling for detailed loan, borrower, and geographic observables. Faster processing does not come at the cost of higher defaults. FinTech lenders adjust supply more elastically than other lenders in response to exogenous mortgage demand shocks, thereby alleviating capacity constraints associated with traditional mortgage lending. In areas with more FinTech lending, borrowers refinance more, especially when it is in their interest to do so. We find no evidence that FinTech lenders target marginal borrowers. Our results suggest that technological innovation has improved the efficiency of financial intermediation in the U.S. mortgage market.