Soft Information and Default Prediction in Cooperative and Social Banks
22 Pages Posted: 18 Jun 2014
Date Written: June 17, 2014
In this paper, to begin with, we define soft information as qualitative, subjective information produced by banks through the establishment of long-term lending relationships. We then highlight the importance of soft information for cooperative and social banks in the screening, pricing and monitoring of their borrowers as a result of their institutional features (governance, values, etc.) and the specificities of their clientele. We finally emphasise the value of qualitative (economic, social and/or environmental) factors stemming from the production of soft information in predicting credit default events.
Keywords: Relationship lending; soft information; credit rating; cooperative and social banking
JEL Classification: G21, L22, M21, P13
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