Philly Fed investigates impact of shocks on credit lines

Using the subprime mortgage crisis as a shock, research published by the Philadelphia Federal Reserve on Thursday shows that commercial borrowers served by more distressed banks took down fewer funds from precommitted, formal lines of credit.

The credit constraints affected mainly smaller, riskier, and shorter-relationship borrowers, and depended also on the lenders' size, liquidity condition, capitalisation position and core deposit funding.

The evidence provides a new explanation as to why

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