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The Behaviour of Domestic and non Domestic Banks in the Housing Credit Market: an Analysis Based on Microeconomic Data
Non-domestic financial institutions have played an important role in smoothing the process of deleveraging of the Portuguese economy, contributing in particular to a minor slowdown in housing credit. The weight of new loans extended by non-domestic banks increased significantly throughout 2010. In addition, the non-domestic banks have charged lower interest rates on new loans than domestic banks. The difference between the rates for both types of institutions has increased in mid-2010, with the deepening of the sovereign debt crisis. In this paper we use microeconomic data on new loans for house purchase to examine whether the domestic and non-domestic banks behave differently regarding the tightness of their credit standards. The results suggest that domestic banks are more sensitive to the riskiness of borrowers than the non-domestic. This behaviour seems to have been more marked in the period in which the difference between interest rates charged by domestic and non-domestic banks widened.