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Asymmetric Information and Credit Rationing : Another View of Industrial Bank Lending and Britain's Economic Problem

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  • Cable, John
  • Turner, Paul

Abstract

British clearing banks have often been attacked over their provision of industrial finance. Lever and Edwards (1980) and Edwards and Carrington (1979) are among the more recent critics ; in their view the failings of the banks in this area are a major cause of Britain's relative economic decline. They emphasize the distortion of the credit system towards easy credit for consumption (especially housing) and away from productive investment. They argue that 'excessively cautious' lending policies on the part of the banks are to blame, rather than any lack of industrial projects which are viable by international standards. They describe industrial finance in the UK as 'short term, dear, unreasonably restricted in amounts, carrying legal risks, and subject to excessive security requirements', in comparision with that provided in countries such as West Germany and Japan.

Suggested Citation

  • Cable, John & Turner, Paul, 1983. "Asymmetric Information and Credit Rationing : Another View of Industrial Bank Lending and Britain's Economic Problem," The Warwick Economics Research Paper Series (TWERPS) 228, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:228
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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp228.pdf
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    Cited by:

    1. Jeremy Edwards & Marcus Nibler, 1999. "Corporate Governance in Germany: The Influence of Banks and Large Equity-holders," CESifo Working Paper Series 180, CESifo Group Munich.

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