Information disclosure and information acquisition in credit markets

Paolo Siciliani and Peter Eccles ()
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Peter Eccles: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1067, Bank of England working papers from Bank of England

Abstract: We analyse how the design of credit registers can influence competition in lending markets. We focus on a particular design choice, namely whether or not credit registers should record previous loan applications that did not result to a subsequent loan origination. This design choice can have subtle effects to the extent that the fact that a prospective borrower has previously applied with other lenders for the same loan can be informative. This is particularly likely to be the case if the failed or withdrawn application was with an innovative lender that is better at screening prospective borrowers thanks to the use of Big Data-driven methodologies (eg ML and AI) alongside the traditional credit scoring approach. On the one hand, we find that when credit registers record previous loan requests rates advertised to borrowers are lower than when credit registers do not record loan requests. On the other hand, the incentives to invest in advanced screening technologies are weakened as a result.

Keywords: Innovation; competition; disclosure; credit markets (search for similar items in EconPapers)
JEL-codes: G20 L15 L40 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2024-03-28
New Economics Papers: this item is included in nep-ban, nep-com and nep-fdg
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