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SUMMARY:Intermediary Financing without Commitment - Yunzhi Hu (Kenan Flagl
 er) 
DTSTART:20201112T130000Z
DTEND:20201112T140000Z
UID:TALK150280@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:Intermediaries can reduce agency frictions in the credit marke
 t through monitoring. To be a\ncredible monitor\, an intermediary needs to
  retain a fraction of its loans\; we study the credit\nmarket dynamics whe
 n it cannot commit to doing so. We compare the role of certification –\n
 monitoring to increase repayment – with the role of intermediation – c
 hanneling funds from\ndepositors to the borrower. With commitment to reten
 tions\, certification and intermediation\nare equivalent. Without commitme
 nt\, they lead to very different dynamics in loan sales and\nmonitoring. A
  certifying bank sells its loans and reduces monitoring over time. By cont
 rast\, an\nintermediating bank issues short-term deposits to internalize t
 he monitoring externalities and\nretain its loans. While the borrowing cap
 acity is higher under intermediation\, an entrepreneur\nmay prefer to borr
 ow from a certifying-only intermediary.
LOCATION:Online
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