The Impact of Sharing Credit Information: Evidence from a Quasi-Natural Experiment

Purpose and goal

This planning grant has been used to write (see attachement) a literature review, produce summary statistics and the beginning of a draft of the paper that addresses the question Does a reduction (increase) in the length of a credit bureau´s retention time increase (reduce) borrowers´ default risk. Furthermore, did we travel to Colombia to negotiation an extension of the register data and met with the financial parties involved in the implementation of the law to receive a better understanding of the practical implementation of the law.

Results and expected effects

We exploit a quasi-experimental variation in retention times to get a better understanding of the impact of a reduction in retention time of negative credit information. Our findings suggest that after the reduction 1. Firms are less likely to repay their loans. 2. Firms are less likely to switch banks after default. 3. Loans granted to firms that switch banks have lower interest rates and higher loan amounts, but more likely to have a collateral 4. In general banks grant loans with looser terms 5.Good firms seem not to be treated differently from bad firms.

Approach and implementation

In order to facilitate optimal cooporation between the participants in the project has Paola Morales visited the Swedish Central Bank during Jan-July 2014. Paola Morales and Marieke Bos have travelled to Colombia to negotiate an extension of the registered data with the data provider the central bank and Paola received the extention. Furthermore, have we obtained a better understanding about the practical implementation of the law by meeting with the financial regulator, a few commercial banks and the credit bureau.