Can Technology Undermine Macroprudential Regulation? Evidence from Online Marketplace Credit in China

56 Pages Posted: 24 Apr 2017 Last revised: 1 Apr 2020

See all articles by Fabio Braggion

Fabio Braggion

Tilburg University - Tilburg University School of Economics and Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Haikun Zhu

Erasmus University Rotterdam

Multiple version iconThere are 2 versions of this paper

Date Written: March 31, 2020

Abstract

We study marketplace credit around a tightening of mortgage loan-to-value (LTV) caps in several cities in China in 2013. Using novel micro data covering all loans and loan applications at a leading marketplace credit platform, we provide evidence consistent with home buyers borrowing online to bypass the tighter LTV cap. Lenders fail to adjust the loan terms, despite the fact that loans attributable to the regulatory arbitrage exhibit ex post higher default rates. These findings suggest that the development of new financial intermediaries can open up non-negligible regulatory arbitrage channels.

Keywords: online marketplace credit; household leverage; macroprudential regulation; loan-to-value caps; Chinese financial system

JEL Classification: G23, G01, G18

Suggested Citation

Braggion, Fabio and Manconi, Alberto and Zhu, Haikun, Can Technology Undermine Macroprudential Regulation? Evidence from Online Marketplace Credit in China (March 31, 2020). Available at SSRN: https://ssrn.com/abstract=2957411 or http://dx.doi.org/10.2139/ssrn.2957411

Fabio Braggion

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Alberto Manconi (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Haikun Zhu

Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

HOME PAGE: http://https://sites.google.com/site/zhuhaikun2018/home

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