Role of Credit Information Sharing and the Funding Cost of Banks

Abstract

Purpose - The objective of the study is to investigate the relationship between the credit information sharing and the funding cost of banks of the top ten “AA rating” commercial banks of Pakistan as the Commercial banks also play a significant role in the economy of every country.
 Design/Methodology - In this study, panel data were analyzed from 2011 to 2017. We selected the top ten “AA rating” banks from Pakistan credit rating agency (PACRA) website, and data related to another related variables are obtained from financial statements of the respective banks. Generalized Method of Moments (GMM) statistical technique was employed to measure the relationship among related variables.
 Findings - The result of the study shows that there is a negative and significant relationship between credit information sharing, operation efficiency, and funding cost. On the other side, profitability has a positive and significant relationship with the funding cost of the bank.
 Practical Implications - To manage the funding cost policymakers must focus two key findings which are credit information sharing and operational efficiency of bank and set up a credit information sharing institutions which help to reduce information irregularity and ultimately manage the funding cost of the banks.

The more the better? Information sharing and credit risk

“…The incentives to misreport borrower data is also modelled in (Semenova 2008). (Ali et al 2019) utilize a game model to demonstrate that information sharing might change the allocation of credit resources and then use data from EU countries to verify whether information sharing affects the aggregate credit volume and default ratio of lenders. The results demonstrate that a comprehensive information exchange system is associated with greater credit access and, hence, a greater aggregate credit volume and higher default ratios.…”