00000nam 2200000za 4500 9.830115 CaOODSP 20221107145445 cr ||||||||||| 170106s2016 onc |o f|0| 0 eng d CaOODSP eng n-cn--- FB3-5/2016-56E-PDF Duprey, Thibaut. Bank screening heterogeneity [electronic resource] / by Thibaut Duprey. [Ottawa] : Bank of Canada, 2016. ii, 42 p. Staff working paper, 1701-9397 ; 2016-56 "December 2016." Includes bibliographic references. Production efficiency and financial stability do not necessarily go hand in hand. With heterogeneity in banks’ abilities to screen borrowers, the market for loans becomes segmented and a self-competition mechanism arises. When heterogeneity increases, the intensive and extensive margins have opposite effects. Bank informational rents unambiguously decrease welfare and distort effort incentives. But the bank most efficient at screening expands its market share by competing against itself to offer effort-inducing contracts, which decreases the share of non-performing loans. A macroprudential authority acting alone reinforces this tension. Optimality is restored by targeting lending policies toward borrowers with intermediate abilities. gccst Financial analysis gccst Regulation gccst Banks Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2016-56 (CaOODSP)9.806221 PDF 882 KB https://publications.gc.ca/collections/collection_2017/banque-bank-canada/FB3-5-2016-56-eng.pdf