Items related to On the Foundations of Credit Rationing

On the Foundations of Credit Rationing - Softcover

Krebs, Helena Maria

 
9783658444877: On the Foundations of Credit Rationing
Softcover
ISBN 10: 3658444878 ISBN 13: 9783658444877
Publisher: Springer Gabler, 2024

Synopsis

Helena Maria Krebs analyzes equilibrium credit rationing when banks compete for loans and deposits in a double-sided Bertrand game. Borrowers and lenders are allowed to switch market sides. Thus, investors do not only base their decisions on loan rates, but also on opportunity costs in the form of deposit rates. Credit rationing may occur if adverse selection due to borrowers’ informational advantage leads to a lower expected return on loans if the loan rate increases. In that case, banks may have an incentive to offer loan rates below the market-clearing rate. At these rates loan demand exceeds loan supply. The author reveals the important role of bank equity and its distribution: Banks with high equity offer cheap loans and reject superfluous loan applicants, whom banks with low equity then offer expensive loans. Thereby expensive banks realize a higher expected return on loans thancheap banks. Furthermore, this book is the first to formally model the process of acceptance and rejection of loan applicants as a separate stage of the double-sided Bertrand game after banks have decided on their interest rates. It is shown that for fixed chosen interest rates, the deposit and loan volumes of all banks in a subgame perfect Nash equilibrium of the resource allocation game are uniquely determined.



"synopsis" may belong to another edition of this title.

About the Author

Helena Maria Krebs received her PhD from the University of Kaiserslautern-Landau working at the intersection of economic theory and economics of banking. Now she is a postdoctoral scholar at the Catholic University of Eichstätt-Ingolstadt.

From the Back Cover

Helena Maria Krebs analyzes equilibrium credit rationing when banks compete for loans and deposits in a double-sided Bertrand game. Borrowers and lenders are allowed to switch market sides. Thus, investors do not only base their decisions on loan rates, but also on opportunity costs in the form of deposit rates. Credit rationing may occur if adverse selection due to borrowers’ informational advantage leads to a lower expected return on loans if the loan rate increases. In that case, banks may have an incentive to offer loan rates below the market-clearing rate. At these rates loan demand exceeds loan supply. The author reveals the important role of bank equity and its distribution: Banks with high equity offer cheap loans and reject superfluous loan applicants, whom banks with low equity then offer expensive loans. Thereby expensive banks realize a higher expected return on loans than cheap banks. Furthermore, this book is the first to formally model the process of acceptance and rejection of loan applicants as a separate stage of the double-sided Bertrand game after banks have decided on their interest rates. It is shown that for fixed chosen interest rates, the deposit and loan volumes of all banks in a subgame perfect Nash equilibrium of the resource allocation game are uniquely determined.


About the author
Helena Maria Krebs received her PhD from the University of Kaiserslautern-Landau working at the intersectionof economic theory and economics of banking. Now she is a postdoctoral scholar at the Catholic University of Eichstätt-Ingolstadt.

"About this title" may belong to another edition of this title.

Publisher
Springer Gabler
Publication date
2024
Language
English
ISBN 10 
3658444878
ISBN 13 
9783658444877
Binding
Paperback
Number of pages
155