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Elusive competition: impact of non-bank credit providers’ financing on credit market competition

Author

Listed:
  • Labib Shami

    (Western Galilee College)

Abstract

This study examines the complexities of augmenting credit market competition through the introduction of newly established non-depository non-bank credit providers reliant on bank financing. We introduce an innovative model that elucidates market dynamics and frictions, highlighting the potential for increased interest rates. The study underscores the pivotal role of borrowers’ insolvency probabilities in this scenario, positing that the proliferation of credit providers might elevate average credit prices. The findings advocate for equitable conditions for new entrants to avoid inadvertently inflating interest rates while fostering competition, offering insights for policy frameworks promoting market access and reduced credit costs.

Suggested Citation

  • Labib Shami, 2025. "Elusive competition: impact of non-bank credit providers’ financing on credit market competition," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(2), pages 288-303, June.
    • Handle: RePEc:pal:jbkreg:v:26:y:2025:i:2:d:10.1057_s41261-024-00259-6
    DOI: 10.1057/s41261-024-00259-6
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    More about this item

    Keywords

    Market design; Financial markets; Interest rates; Credit; Banks; Non-bank financial institutions;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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