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On the rationale of bank lending in pre-crisis Thailand

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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 a higher importance of relationship banking and risk control via credit availability. Information about later default reveals prudent relationship lending. However, banks could have made better use of available information about borrowers' riskiness. These findings do not support a general verdict of bad banking but indicate room to improve lending decisions.

Document Type: Research Article

DOI: https://doi.org/10.1080/00036840500447815

Affiliations: 1: Department of Economics, University of Hannover, D-30167 Hannover, Germany 2: Chulalongkorn University, Thailand

Publication date: 2007-05-01

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