This paper explores the empirical relationship between bank competition, bank concentration, and the emergence of credit reporting institutions. The authors find that countries with lower entry barriers into the banking market (that is, a greater threat of competition) are less likely to have a credit bureau, presumably because banks are less willing to share proprietary information when the threat of market entry is high. In addition, a credit bureau is significantly less likely to emerge in economies characterized by a high degree of bank concentration. The authors argue that the reason for this finding is that large banks stand to lose more monopoly rents from sharing their extensive information with smaller players. In contrast, the data show no significant relationship between bank competition or concentration and the emergence of a public credit registry, where banks' participation is mandatory. The results highlight that policies designed to promote the voluntary creation of a credit bureau need to take into account banks' incentives to extract monopoly rents from proprietary credit information.
Details
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Author
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Document Date
2013/05/01
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Document Type
Policy Research Working Paper
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Report Number
WPS6442
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2013/05/01
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Disclosure Status
Disclosed
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Doc Name
Bank competition, concentration, and credit reporting
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Keywords
Finance & Private Sector Development;credit registry;bank competition;financial and private sector development;legal origin;total number of individual;foreign ownership of bank;country income group;barrier to entry;british legal origin;asset share;credit bureau information;availability of credit;high entry barrier;transparency of information;monopoly rent;credit reporting system;public credit registry;probit regression;market for credit;implicit government guarantee;impact of credit;higher interest rate;access to finance;data processing service;creditor right;large bank;financial intermediation;contract enforcement;banking sector;banking market;statistical significance;high probability;credit market;standard error;market power;administrative cost;marginal effect;foreign bank;private return;bank entry;
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Citation
Bruhn,Miriam Farazi,Subika Kanz,Martin
Bank competition, concentration, and credit reporting (English). Policy Research working paper ; no. WPS 6442 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/285031468314679060/Bank-competition-concentration-and-credit-reporting