Innovation in Banking and Excessive Loan Growth

Publication Date:

July 1, 2008

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The volume of credit extended by a bank can be an informative signal of its abilities in loan selection and management. It is shown that, under asymmetric information, banks may therefore rationally lend more than they would otherwise in order to demonstrate their quality, thus negatively affecting financial system soundness. Small shifts in technology and uncertainty associated with new technology may lead to large jumps in equilibrium outcomes. Prudential measures and supervision are therefore warranted.

Series:

Working Paper No. 2008/188

Subject:

Bank credit Banking Credit Loans Technology

English

Publication Date:

July 1, 2008

ISBN/ISSN:

9781451870466/1018-5941

Stock No:

WPIEA2008188

Pages:

28

Please address any questions about this title to publications@imf.org