There are a number of theories that analyse the reasons for the 2008 financial crisis, but all of them share the idea that the risk management system was a decisive factor: the housing and credit bubble were the result of excessive risk-taking, which revealed major shortcomings in the awarding of mortgages.

Now, a study published in Barcelona GSE Working Paper Series addresses this problem which arose during the financial crisis from the gender perspective of credit officers. Specifically, it discusses how the fact that the officers were men or women affected the approval of loans and subsequent delinquency.

The study discusses how the fact that the officers were men or women affected the approval of loans and subsequent delinquency.

“Gender economics in the management of credit risk remains underestimated”, say the authors of the study, José García Montalvo, professor of Applied Economics, and Marta Reynal-Querol, ICREA research professor, both linked to the Department of Economics and Business at UPF and the GSE.

In their work, which looks into an area hitherto little studied, they examine the decisions of nearly 1,500 officers on almost half a million mortgages and consumer loans granted by several Spanish banks during 2002-2013, but which they believe can be extrapolated to the entire sector.

The study concludes that the loan portfolio of women officers generated fewer payment incidents: “The loans granted by women officers suffer 15% less delinquency than those granted by men; this figure represents a delinquency rate of between 1.5 and 2.5 points less, which is a highly significant result, economically speaking”, say the authors.

In addition to quantifying these gender differences in the granting of loans, the study analyses for the first time whether men and women officers of bank branches followed the recommendations of the department of risks and the computer system in the same way, and the results are clear: women officers turned down 36% of loans classified as high risk, while men only declined 15%”, they conclude.

Moreover, the research finds that depending on the risk score and assessment, women officers follow the recommendations more often than men and apply exceptional circumstances to override the recommendation by the system less often. This means that the loans granted by women perform better.

What can lead to following (or not) the recommendations when granting a loan?

According to the study, one possible explanation for the higher level of compliance by women in relation to men stems from a gender bias: “Using our data, we found that women who accumulate a high proportion of non-performing loans are more likely to be punished than men with the same level of performance”, say the authors.

Women officers’ professional careers are more penalized according to their loan performance record.

Women officers’ professional careers are more penalized according to their loan performance record. Specifically, with a loan portfolio with a delinquency rate of 4%, a woman officer has a 16% likelihood of being dismissed or relegated to a lower status than a man.

The study asserts that the bank’s recommendation can be avoided in an exceptional circumstance: the officer, despite the negative recommendation by the risks department, can approve a loan on these exceptional grounds, covered by such arguments as future business prospects for the bank from a customer.

Finally, the study reveals how after 2008, once the bubble had burst, this significant gender effect disappeared in the delinquency rate: controls became stricter again, the possibility of not taking notice of the recommendation to reject a loan was eliminated, and men and women officers again adopted similar behaviour.

Reference Work:“Gender and Credit Risk: A View From the Loan Officer’s Desk”, José G. Montalvo i Marta Reynal-Querol (March 2019). Barcelona GSE Working Paper Series. Working Paper nº 1076