Multiple-Bank Lending, Creditor Rights and Information Sharing

Marco Pagano, Alberto Bennardo () and Salvatore Piccolo ()

No 7186, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Creditor rights; Information sharing; Multiple-bank lending; Non-exclusivity; Seniority (search for similar items in EconPapers)
JEL-codes: D73 K21 K42 L51 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-ban, nep-cta, nep-law and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Related works:
Journal Article: Multiple Bank Lending, Creditor Rights, and Information Sharing (2015)
Working Paper: Multiple-Bank Lending, Creditor Rights and Information Sharing (2010)
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