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

56 Pages Posted: 24 Apr 2017 Last revised: 14 Sep 2019

See all articles by Fabio Braggion

Fabio Braggion

Tilburg University - Tilburg University School of Economics and Management; Tilburg University - European Banking Center

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: September 13, 2019

Abstract

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

Braggion, Fabio and Manconi, Alberto and Zhu, Haikun, Can Technology Undermine Macroprudential Regulation? Evidence from Online Marketplace Credit in China (September 13, 2019). 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

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

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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