Publications
Publications
- Journal of Accounting & Economics
The Harmonization of Lending Standards within Banks through Mandated Loan-Level Transparency
By: Jung Koo Kang, Maria Loumioti and Regina Wittenberg-Moerman
Abstract
We explore whether the introduction of transparent reporting rules increases credit standard harmonization within a bank. We exploit the new loan-level reporting rules imposed on banks that borrow from the European Central Bank using repurchase agreements collateralized by their asset-backed securities. We compare credit terms of similar mortgages issued by a bank across a country's regions and find that harmonization increases following the adoption of the new reporting rules. Learning and regulatory scrutiny constitute mechanisms underlying this economic effect. We also show that harmonization leads to more favorable lending terms to borrowers and higher loan quality for banks. Overall, these findings suggest that transparent reporting rules incentivize banks to improve their internal decision-making and thereby reduce regional divergence in their credit standards.
Keywords
Transparency; External And Internal Reporting; Credit Term Harmonization; Regulatory Scrutiny; Banks and Banking; Credit; Financial Reporting; Governing Rules, Regulations, and Reforms; Learning
Citation
Kang, Jung Koo, Maria Loumioti, and Regina Wittenberg-Moerman. "The Harmonization of Lending Standards within Banks through Mandated Loan-Level Transparency." Journal of Accounting & Economics 72, no. 1 (August 2021): 101386.
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