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On the rationale of bank lending in pre-crisis Thailand

[journal article]

Menkhoff, Lukas; Suwanaporn, Chodechai

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Abstract Evidence from credit files is provided to examine bank lending determinants of Thai commercial banks. Their lending practice follows reasonable patterns as a standard set of variables, including indirect risk variables, explains much of the variance in interest rate spread. Reflecting institutional differences with mature markets, we find higher im-portance of relationship banking and risk control via credit availability. Information about later default reveals prudent relationship lending. However, banks could have made bet-ter use of available information about borrowers' riskiness. These findings do not sup-port a general verdict of bad banking but indicate room to improve lending decisions.
Document language English
Publication Year 2007
Page/Pages p. 1077-1089
Journal Applied Economics, 39 (2007) 9
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)