Better safe than sorry: defensive loan assessment behaviour in a changing bank environment

Lending officers (LOs) assess loan applications under conditions characterized by shifts in economic climate, wavering public credibility for banks and greater industry regulation. This paper examines the extent to which, in such an economic environment, the LOs’ assessment of commercial loan applications may be defensive, and, if so, which mechanisms that may trigger defensive loan assessment behaviour among LOs. Using data from interviews with 76 LOs in one major Swedish commercial bank and a focus group session, our findings suggest that in the economic environment studied, LOs tend to show a defensive approach to loan assessment with the intent to avoid risk and blame. This behaviour assumes different forms, including; avoiding change, playing safe, over-conforming, depersonalizing and using information symbolically. Triggering mechanisms reside on environmental, bankand individual levels of analysis. Overall, this study contributes to the literature by demonstrating triggering mechanisms, intentions among LOs and forms of defensive loan assessment behaviour.