جامع عموم و متخصصین بازار اعتباری Generalists and specialists in the credit market

1. Introduction Understanding the structure of the credit market is paramount to ensure the role of the banking system as an efficient liquidity and credit allocation mechanism. Failure to manage and regulate the banking system can in fact have disastrous externalities, as exemplified by experiences of financial crises (Hoggarth et al., 2002; Dell’Ariccia et al., 2008). The shape of credit interactions between banks and the real economy is, therefore, a key element in the analysis, but little is known about how this credit network looks like. Do most banks hold diversified loan portfolios and therefore provide liquidity to firms from all industries of the economy? Are there specialists that focus their portfolio on a small number of industries? If so, do different specialists focus on different industries? Are there significant differences in the risk profiles of these institutions? We tackle these questions in this paper. Whether banks should diversify their loan portfolios or focus on a small number of industries is an important yet open research question. For what follows, we define generalist banks as those banks that diversify their loan portfolios across many different industries, thereby interacting with a very heterogeneous set of firms. We also define specialist banks as those banks that hold more concentrated portfolios and only interact with firms from a relatively small subset of industries.1 Like other investors, banks face a trade-off in choosing their diversification levels. On the one hand, generalist banks should be, through the benefits of diversification, less vulnerable to firm- or industry-specific shocks. On the other hand, gaining industry-specific expertise, e.g., via more efficient screening and monitoring of particular types of firms, is valuable to banks (Stomper, 2006). By focusing on relatively few types of businesses, specialist banks might therefore be able to improve their performance at the cost of becoming more vulnerable to industry-specific shocks. In addition, banks face time-varying external constraints (e.g., regulatory) that may further encourage either diversification or specialization.2 From this perspective, it is not surprising that banks’ diversification levels are found to be rather heterogeneous empirically (e.g., Acharya et al., 2006; Hayden et al., 2007; Tabak et al., 2011). Nevertheless, little is known about the typical pattern of interactions between banks and the real economy, and the prevalence of generalists and specialists in these systems. A related question is whether specialist banks are indeed special, i.e., do specialist banks tend to occupy niches? In a world where specialist banks possess comparative advantages in dealing with firms from certain industries (e.g., via gaining superior information about their counterparties), they should focus their activities on specialist industries where few other banks are present. In this regard, recent research highlights the role of overlapping portfolios as a potential source of systemic risk (Wagner, 2011; Caccioli et al., 2014; Greenwood et al., 2015; Glasserman and Young, 2015). The idea is that, by holding common assets, banks are not only prone to the same direct shocks, but also to systemic asset liquidations of other banks. Little is known, however, about how overlapping bank portfolios are in the real world.