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Regina Wittenberg-Moerman

24 January 2020
We explore whether the transparency in banks’ lending activities enhances the harmonization of credit terms that a bank offers across its different geographic regions. We take advantage of a novel loan-level reporting initiative by the European Central Bank, which requires repo borrowing banks that pledge their asset-backed securities as collateral to disclose granular information on loan characteristics and performance. We find that loans originated under the transparency regime share more similar interest rate, loan-to-collateral-value ratio and maturity compared to same-purpose loans issued by the same bank in different regions. Underperforming regional branches and those with less easily accessible peer-branches experience greater convergence in their credit terms, suggesting that transparency facilitates learning across a bank’s different geographic regions. Additionally, banks that face stronger regulatory scrutiny are more likely to alleviate credit term disparities under the transparency regime. Overall, our findings suggest that transparency enhances the within-bank harmonization of lending practices.
JEL Code
M41 : Business Administration and Business Economics, Marketing, Accounting→Accounting and Auditing→Accounting
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
D83 : Microeconomics→Information, Knowledge, and Uncertainty→Search, Learning, Information and Knowledge, Communication, Belief
ECB Lamfalussy Fellowship Programme