Template-type: ReDif-Paper 1.0
Author-Name: Kleimeier S. 
Author-Name: Dinh T.H.T. 
Author-Name: Straetmans S.T.M. 
Author-workplace-name: GSBE
Title: Bank lending strategy, credit scoring and financial crises
Abstract: Adverse selection inherent in the bank-borrower relationship typically intensifies during crises. This problem is expecially severe in emerging markets, characterized by weak institutions and banks with poorly developed monitoring and screening abilities. Exploiting a unique sample of Vietnamese loans, we show that by updating their credit scoring models banks can significantly improve their screening abilities. Our results suggest that a crisis fundamentally changes default patterns and that a model based on post-crisis data outperforms models based on pre-crisis data. We conclude that updating credit scoring models is a viable alternative to credit rationing for banks and, in combination with relationship lending, can lead to improved loan pricing, efficiency and profitability.
Keywords: Financial Markets and the Macroeconomy; Banks; Depository Institutions; Micro Finance Institutions; Mortgages; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance; 
Classification-JEL: E44; G21; O16; .
Series:  research memorandum
Creation-Date: 2013
Number: 053
File-URL: http://pub.maastrichtuniversity.nl/b45fd967-d4b1-4cab-8798-968d0430123f
File-Format: application/pdf
File-Size: 5387713
Handle: RePEc:unm:umagsb:2013053