Collateral requirements are more stringent for business loans granted by local lenders than those granted to firms further away, a paper published by the Bank of Spain finds.

The reason for this is that local banks are more willing to lend to less secure, more opaque firms, but require more collateral for doing so. Banks further away tend not to lend to such firms, specialising in lending to more transparent borrowers. Also those firms that begin a relationship with a local lender tend to be