Citation

Discussion Paper Details

Please find the details for DP7186 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Multiple-Bank Lending, Creditor Rights and Information Sharing

Author(s): Alberto Bennardo, Marco Pagano and Salvatore Piccolo

Publication Date: February 2009

Keyword(s): creditor rights, information sharing, multiple-bank lending, non-exclusivity and seniority

Programme Area(s): Financial Economics

Abstract: When a customer can borrow from several competing banks, multiple lending raises default risk. If creditor rights are poorly protected, this contractual externality can generate novel equilibria with strategic default and rationing, in addition to equilibria with excessive lending or non-competitive rates. Information sharing among banks about clients' past indebtedness lowers interest and default rates, improves access to credit (unless the value of collateral is very uncertain) and may act as a substitute for creditor rights protection. If information sharing also allows banks to monitor their clients' subsequent indebtedness, the credit market may achieve full efficiency.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7186

Bibliographic Reference

Bennardo, A, Pagano, M and Piccolo, S. 2009. 'Multiple-Bank Lending, Creditor Rights and Information Sharing'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7186