Bank stability, credit information sharing and a shift toward households' lending: international evidence

Abstract

PurposeThe study aims to investigate the relationship between a shift in lending activities toward households, credit information sharing and bank stability.Design/methodology/approachA system generalized method of moments (GMMs) as proposed by Arellano and Bover (1995) is employed to examine the relationship using a sample of 80 countries from 2005 to 2014.FindingsThe findings demonstrate that, in general, a shift in lending strategy toward the household sector may increase bank instability while credit information sharing has a positive impact on bank stability. When credit information sharing is promoted widely, this shift may become beneficial for the banking system. The results are robust when using different measures of credit information sharing, including the depth of index and the coverage of credit information sharing mechanisms.Practical implicationsThe results demonstrate that a shift in lending activities toward households should be considered a key variable in conducting macro-prudential policies. When a shift toward household credit relative to firm credit is evolved, the findings suggest that the authorities around the world should enact laws that magnify the scope and coverage of credit information shared and thus promoting the effectiveness of information sharing.Originality/valueThe current study is the first attempt that examines the impacts of a shift in lending activities toward households and credit information sharing on bank stability.

A shift towards household lending during the Fintech era: the role of financial literacy and credit information sharing

“…Additionally, the empirical findings indicate that a shift in lending activities towards households is widespread in markets that were hit by a financial crash. As Büyükkarabacak and Valev (2010) and Le and Nguyen (2021) suggested that the lending shift towards households could impact bank stability, our evidence demonstrates that the authorities should closely monitor and supervise the growth of household credit relative to firm credit when conducting macro-prudential policies. Last, our findings highlight that fintech credit development is generally found to be complementary to the traditional lending system, as this new lending model improves the growth of total private credit and its components.…”

“…Model 7 and Model 9 in Table 6 indicate that the coefficients of Crisis are positive and significant, implying that a shift in lending activities towards households was more prevalent in a country that suffered a financial crash. This suggests that the authorities should closely supervise household credit, as this lending shift could affect bank stability (Büyükkarabacak and Valev, 2010; Le and Nguyen, 2021). Nonetheless, the findings on main variables still hold.…”

“…, 2021). In contrast, we extended the suggestion of Le and Nguyen (2021) by empirically examining the relationship between fintech credit and a shift in lending activities towards households relative to firms. With this new evidence, our findings shed light on whether fintech credit serves as a complement to or a substitute for conventional lending institutions.…”

“…The importance of a shift in lending activities towards households to the banking stability was emphasized by Le and Nguyen (2021) and Büyükkarabacak and Valev (2010). The literature suggests that this shift is influenced by several important factors, including credit information sharing, financial literacy and fintech credit development.…”

The environment, social and governance (ESG) activities and profitability under COVID-19: evidence from the global banking sector

“…When including the impact of the global financial crisis in the original model, the negative impact of the health crisis remains and the negative impact of GFC is also found. The adverse impact of GFC is well-documented in the literature (Le and Ngo, 2020; Le and Nguyen, 2021). Unlike the global financial crisis of 2007–2009, this coronavirus crisis indirectly impacted the global banking system by disrupting the demand and supply sides of the entire economy and the supply chain worldwide.…”