Collateral Damage

Savvakis Savvides

No 2019-13, Development Discussion Papers from JDI Executive Programs

Abstract: It is argued that lending where the overwhelming criterion is the collateral rather than the repayment capability of the project and the borrower is highly likely to be unproductive and will inevitably lead to a transfer of wealth. If this is done on a systematic and massive scale as was the case in Cyprus in the years leading to the 2013 crisis it is also likely to cause a long and deep balance sheet recession. Banks should therefore be in check and held accountable for such professional malpractices.

Keywords: Economic development; repayment capability; project evaluation; corporate lending; credit risk (search for similar items in EconPapers)
JEL-codes: D61 G17 G21 G32 G33 H43 (search for similar items in EconPapers)
Pages: 3 pages
Date: 2019
New Economics Papers: this item is included in nep-ban and nep-cfn
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