Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2012-12-20
Number: 12-146/IV/DSF49
Author-Name: Stefan Arping
Author-Workplace-Name: University of Amsterdam
Title: Banking Competition and Soft Budget Constraints: How Market Power can threaten Discipline in Lending
Abstract: In imperfectly competitive credit markets, banks can face a tradeoff between exploiting their market power and enforcing hard budget constraints. As market power rises, banks eventually find it too costly to discipline underperforming borrowers by stopping their projects. Lending relationships become "too cozy", interest rates rise, and loan performance deteriorates.
Classification-JEL: G2, G3
Keywords: Banking Competition, Soft Budget Constraint Problem, Moral Hazard
File-Url: https://papers.tinbergen.nl/12146.pdf
File-Format: application/pdf
File-Size: 486248 bytes
Handle: RePEc:tin:wpaper:20120146