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<p>We study the effect of public-guaranteed loans (PGLs) on bank risk-taking during the COVID-19 pandemic in France. The presence of guarantee schemes may foster riskier lending, pushing banks to lend to riskier borrowers or worsening incentives to prevent write-offs of loans. Yet, we find that the partial government guarantee (between 70% and 90% of the loan) encouraged banks to lend according to their usual risk criteria so that safest firms obtained higher amounts of PGLs. In addition, banks that were less capitalized and more exposed to non-performing loans (NPLs) before the pandemic granted PGLs with larger individual loan amounts, thereby using the guaranteed loan program to improve their financial position and reduce their risk-weighted assets (RWAs) through a regulatory capital windfall effect. Finally, at the aggregate bank level, we find that PGLs had no impact on the overall credit risk of banks portfolio.</p>

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Public-Guaranteed Loans, Bank Risk-Taking, and the Regulatory Capital Windfall

  • 期刊论文

  • 发表日期：

    2025年12月19日

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  • Théo Nicolas,
  • Stefano Ungaro,
  • Eric Vansteenberghe

摘要

We study the effect of public-guaranteed loans (PGLs) on bank risk-taking during the COVID-19 pandemic in France. The presence of guarantee schemes may foster riskier lending, pushing banks to lend to riskier borrowers or worsening incentives to prevent write-offs of loans. Yet, we find that the partial government guarantee (between 70% and 90% of the loan) encouraged banks to lend according to their usual risk criteria so that safest firms obtained higher amounts of PGLs. In addition, banks that were less capitalized and more exposed to non-performing loans (NPLs) before the pandemic granted PGLs with larger individual loan amounts, thereby using the guaranteed loan program to improve their financial position and reduce their risk-weighted assets (RWAs) through a regulatory capital windfall effect. Finally, at the aggregate bank level, we find that PGLs had no impact on the overall credit risk of banks portfolio.