This paper analyses the determinants of the probability of default (PD) of bank loans. We focus the discussion on a limited set of determinants (collateral, type of lender and bank-borrower relationship) while controlling for the other explanatory variables such as the macroeconomic environment, characteristics of the borrower (industry and region) and of the loan (instrument, currency, maturity and size). We try to discern if riskier borrowers are asked to pledge more collateral or if, on the other hand, low risk borrowers are those who have collateralised loans1. Banks managed by conservative managers (maybe those of savings banks) might be.
