Location of Repository

Credit Rationing with Symmetric Information

By Guido Fioretti

Abstract

Without denying the importance of asymmetric information, this article purports the view that credit rationing may also originate from a lender's inability to classify loan applicants in proper risk categories. This effect is particularly strong when novel technologies are involved. Furthermore, its relevance may increase with the importance assigned to internal rating systems by the Basel accord. This article presents a measure of the inadequacy of a lender's classification criteria to the qualitative features of prospective borrowers. Even without information asymmetries, credit rationing may occur if this quantity reaches too high a value. Furthermore, some general principles are outlined, that may be used by lenders in order to change their classification criteria.

Topics: D89 - Other, E41 - Demand for Money
Year: 2008
DOI identifier: 10.2139/ssrn.1118730
OAI identifier: oai:mpra.ub.uni-muenchen.de:8201

Suggested articles

Preview


To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.