‘Multiple lending’ may cause contagion during stress – paper
Researchers say multiple lending may ease liquidity shocks in normal conditions, however
A working paper published by the Bank of Italy looks at the effects of “multiple lending”, where borrowers may have more than one creditor, on a banking system.
In Multiple lending, credit lines and financial contagion, Giuseppe Cappelletti and Paolo Emilio Mistrulli apply Italian supervisory data to a model to simulate the extent of multiple lending in Italy’s financial system. They then run a number of scenarios to judge the effect of a liquidity shock on a system characterised by multiple
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