Credit Information Sharing and the Shift in Bank Lending towards Households

Bahadir, Berrak; Valev, Neven T.

doi:10.2139/ssrn.3271014

Cited by 4 publications

(18 citation statements)

References 14 publications

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“…Further, we also test the association of the share of household credit with lagged measures of EPU and obtain similar results, thus alleviating concerns of reverse causality. Our results also remain consistent after accounting for information sharing, which has been shown to positively influence the share of household credit at the country level (Bahadir & Valev, 2019). The main findings are robust to estimation using country-level aggregates of household and total credit compiled by Léon (2018).…”

Section: Introductionsupporting

confidence: 76%

“…By contrast, earlier studies on household and firm credit (for instance, Bahadir & Valev, 2017Beck, Büyükkarabacak, Rioja, & Valev, 2012;Léon, 2018;Mian et al, 2017) have relied on aggregate country-level data. Our finding for economic policy uncertainty complements the study of Bahadir and Valev (2019) who document the positive effect of credit information sharing on the share of bank lending to households using aggregate country-level data. Using micro-level data allows us to control for heterogeneity across banks in terms of bank characteristics that can affect the composition of bank loans, such as capital ratios, size and profitability of banks.…”

Section: Introductionsupporting

confidence: 74%

“…In a study of 25 European countries, Bahadir and Valev (2019) document the positive impact of credit information sharing on the ratio of household credit to business credit at the country level, after controlling for several macroeconomic factors, such as GDP per capita, level of financial development, level of government spending, inflation, and the quality of institutions in their analysis. Rubaszek and Serwa (2014) show for 36 high-and middle-income countries that credit to households as a share of GDP is negatively related to the spread between lending and deposit rates, and also negatively related to the persistence of incomes.…”

Section: Background and Literature Reviewmentioning

confidence: 99%

“…Leon (2018) and Bahadir and Valev (2017) discuss the convergence of household credit and firm credit at the country level. In a related study on aggregate household and business credit in European countries, Bahadir and Valev (2019) find that credit information sharing positively influences the share of household credit in overall bank lending. In a crosscountry study, Mian, Sufi, and Verner (2017) find that rise in household credit as a share of GDP is linked to lower subsequent output growth and higher unemployment.…”

Section: Introductionmentioning

confidence: 98%

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The implications of economic uncertainty for bank loan portfolios

Mohapatra

Purohit

2021

Applied Economics

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This paper analyses the impact of economic uncertainty on the composition of bank credit across household and firm loans. Using bank-level data spanning 40 developed and developing countries, we find that higher economic uncertainty is associated with an increase in the relative share of household credit in the loan portfolio of banks. This change in composition of credit may result from banks' efforts to reduce the overall riskiness of their loan portfolios, since corporate loans are generally viewed as riskier than household loans. This shift is more pronounced for weakly-capitalized banks, which may face greater risks during economic shocks, and for larger banks, which may be riskier due to complex business models and more market-based activities. The variation in our main findings by banks' capitalization and size suggests that they arise from changes in bank credit supply in response to greater uncertainty. The baseline results hold for a range of robustness tests. Our study highlights the role of aggregate uncertainty in micro-level outcomes and is relevant for bank capital regulation and the conduct of macroprudential policy.

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Section: Introductionsupporting

confidence: 76%

Section: Introductionsupporting

confidence: 74%

Section: Background and Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 98%

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The implications of economic uncertainty for bank loan portfolios

Mohapatra

Purohit

2021

Applied Economics

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“…On borrower default, Jappelli and Pagano (2002) and Behr and Sonnekalb (2012) find that credit information sharing reduces borrower default. More recently, Bahadir and Valev (2019) report that credit information sharing disproportionately increases lending to households relative to businesses. Due to data unavailability, a bulk of the prior empirical literature excluded African countries, leaving policy makers in Africa with very little guidance on how credit information sharing schemes could impact the economy.…”

Section: Related Literature and Hypothesesmentioning

confidence: 99%

Credit information sharing and bank loan pricing: Do concentration and governance matter?

et al. 2020

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The development of credit information sharing schemes in developing countries has gained significant attention in recent times along with ongoing financial sector reforms. In this paper, we provide first‐hand evidence of the effect of credit information sharing on credit intermediation cost in these countries, and consequently ascertain the extent to which the credit information sharing–credit intermediation cost nexus may be accentuated by banking market concentration and governance quality. Using a large dataset covering 272 banks from 27 African countries over the 2004–2012 period, we uncover four new findings. First, we find that credit information sharing does reduce credit intermediation cost. Second, we show that the relationship between credit intermediation cost and credit information sharing is conditional on banking market concentration. Third, our findings suggest that governance quality moderates the effect of credit information sharing on credit intermediation cost. Finally, we find that banking market concentration reduces credit intermediation cost, but the effect is moderated by credit information sharing. Overall, our findings suggest that credit information sharing may serve as a useful policy tool for achieving financial sector stability in developing countries.

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Bank stability, credit information sharing and a shift toward households' lending: international evidence

Le¹,

Nguyen²

2021

IJMF

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PurposeThe study aims to investigate the relationship between a shift in lending activities toward households, credit information sharing and bank stability.Design/methodology/approachA system generalized method of moments (GMMs) as proposed by Arellano and Bover (1995) is employed to examine the relationship using a sample of 80 countries from 2005 to 2014.FindingsThe findings demonstrate that, in general, a shift in lending strategy toward the household sector may increase bank instability while credit information sharing has a positive impact on bank stability. When credit information sharing is promoted widely, this shift may become beneficial for the banking system. The results are robust when using different measures of credit information sharing, including the depth of index and the coverage of credit information sharing mechanisms.Practical implicationsThe results demonstrate that a shift in lending activities toward households should be considered a key variable in conducting macro-prudential policies. When a shift toward household credit relative to firm credit is evolved, the findings suggest that the authorities around the world should enact laws that magnify the scope and coverage of credit information shared and thus promoting the effectiveness of information sharing.Originality/valueThe current study is the first attempt that examines the impacts of a shift in lending activities toward households and credit information sharing on bank stability.

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Credit Information Sharing and the Shift in Bank Lending towards Households

Cited by 4 publications

References 14 publications

The implications of economic uncertainty for bank loan portfolios

The implications of economic uncertainty for bank loan portfolios

Credit information sharing and bank loan pricing: Do concentration and governance matter?

Bank stability, credit information sharing and a shift toward households' lending: international evidence

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