Could dishonest banks be disciplined ?

Mahmoud Nabi and Souraya Ben Souissi

MPRA Paper from University Library of Munich, Germany

Abstract: Could a credit bureau incite banks to report correct information about their borrowers? We show that banks will choose the incorrect information sharing in the last period to increase their profits. Interestingly, however, it is shown that this strategy is optimal at the second period only if the proportion of successful projects is superior to 50%. In that case the Credit Bureau should enforce a sufficiently high penalty in order to incite banks to share information honestly. The penalty threshold that conditions the efficiency of the credit bureau’s role is endogenously derived.

Keywords: Information sharing; penalty; incitation mechanism; credit bureau. (search for similar items in EconPapers)
JEL-codes: D82 G21 L14 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-ban and nep-cta
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:32010

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