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

We examine the impact of banks' liquidity risk 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 credit register of syndicated bank loans administered by U.S. regulators. We analyze the 2007-2009 financial crisis as a market-wide liquidity shock and control for loan demand using a loan-year fixed effects approach. We find that banks with greater reliance on wholesale funding at the onset of the crisis were more likely to exit loan syndicates during the crisis. Our analysis identifies the importance of bank liquidity risk management as a motivation for loan sales, in addition to the credit risk transfer motive emphasized in prior literature.