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Bank pricing of corporate loans
We analyze the pricing of firm loans originated by the largest banks operating in Portugal between September 2018 and December 2019. On average loans are overpriced in the short-run and underpriced in the long-run. Underpricing is lower in the subsample of loans originated in 2019. Loans with maturity longer than a year, loans to the construction, real estate, and transportation and storage sectors, and loans to high credit risk borrowers are on average underpriced. Loans to other borrowers are generally overpriced. Borrowers and sectors with underpriced loans are potential sources of fragility in the financial sector, especially in the medium to long-run.