Loan Sales and Bank Liquidity Management: Evidence from a U.S. Credit Register

Abstract

We document the impact of banks’ liquidity management on secondary loan sales. We track the dynamics of bank loan share ownership in the secondary market using data from the Shared National Credit Program, a U.S. supervisory credit register of syndicated bank loans. Controlling for loan quality using a loan-year xed eects approach, we nd that banks with greater reliance on wholesale funding at the onset of the 2007{ 2009 nancial crisis were more likely to exit loan syndicates via loan sales during the crisis. We therefore establish that during periods of marketwide stress|characterized by disruptions in short-term wholesale funding markets|banks use secondary loan sales as a liquidity management technique. Our ndings provide empirical support to and have implications for the design of the Basel III liquidity regulations.