The paper develops a new theory for why some banks implement loan policies that exclude profitable but risky firms. We assume that firms seeking credit will try to evaluate the performance of a bank's existing client portfolio. In case many of the existing clients have entered financial distress, new clients will suspect the bank to be at the origin of the firms' bad performance. In order to signal that they will not endanger the financial health of their borrowers, banks might need to ration riskier, yet profitable, firms.