Can Technology Undermine Macroprudential Regulation? Evidence from Online Marketplace Credit in China
56 Pages Posted: 24 Apr 2017 Last revised: 14 Sep 2019
Date Written: September 13, 2019
We study the relationship between FinTech and credit regulation. We exploit the tightening of mortgage LTV caps in various Chinese cities in 2013, and a novel database covering all transactions at RenrenDai, a leading marketplace credit platform. Marketplace loans increase in the affected cities, consistent with borrowers tapping online marketplace credit to circumvent the regulation. Lenders do not adjust their pricing to the influx of new borrowers, although their loans exhibit worse ex-post performance. Symmetric effects are associated with a loosening of LTV caps in 2015 and 2016. Our test provides evidence on the capacity of marketplace credit to undermine credit regulation.
Keywords: online marketplace credit; household leverage; macroprudential regulation; loan-to-value caps; Chinese financial system
JEL Classification: G23, G01, G18
Suggested Citation: Suggested Citation