Focus on fair lending has become more intensified recently as bank and non-bank lenders apply artificial-intelligence (AI)-based credit determination approaches. The data analytics technique behind AI machine learning (ML) proven to be powerful in many application areas. However, ML can less transparent explainable than traditional regression models, which may raise unique questions about its c...

Credit scoring and behavioural scoring are the techniques that help organisations decide whether or not to grant credit to consumers who apply to them. This article surveys the techniques used – both statistical and operational research based – to support these decisions. It also discusses the need to incorporate economic conditions into the scoring systems and the way the systems could change ...

Machine learning has matured to the point to where it is now being considered to automate decisions in loan lending, employee hiring, and predictive policing. In many of these scenarios however, previous decisions have been made that are unfairly biased against certain subpopulations (e.g., those of a particular race, gender, or sexual orientation). Because this past data is often biased, machi...

T he lending activity of commercial banks has long received considerable attention as an important contributor to the performance of the economy. This attention has, perhaps, become sharper in the wake of the difficulties experienced by the banking industry in the 1980s. In recent years, the public perception of bank lending seems to have swung through a cycle. In the early 1990s, the prevailin...

The Basel Committee for Banking Supervision recently drew a great deal of attention when they published their proposal for a New Basel Capital Accord (2001). Among the critisism, praise, and numerous responses it generated, one aspect was given very little attention: the credit cycle. Traditionally, credit had been granted at the same or very similar conditions to all the credit applicants who ...

Interest rate based tests and savings-investment correlations disagree on the extent of capital mobility in Pacific Rim economies. The apparent success of several East Asian countries in sterilizing capital inflows has also fueled the controversy. This paper argues that previous studies examining money market rates may be misplacing their focus, since most lending is mediated through (sometimes...

This paper seeks to explain the role of bank capital in uctuations of lending and output. We build a continuous time model of an economy in which commercial banks nance their loans by deposits and equity, while facing issuance costs when they raise new equity. The dynamics of the loan rate and the volume of lending in the economy are driven by aggregate bank capitalization. The model has a uniq...

changes in credit risk may arise when either the value or the risk of corporate assets changes. changes in the equity value associated with the changes in the asset value and changes in asset risk can be characterized into potentially countervailing direct and indirect effects. the indirect effect of risk on equity value is a function of factors that affect the debt value of including leverage,...

Consumer finance has become one of the most important areas of banking both because of the amount of money being lent and the impact of such credit on the global economy and the realisation that the credit crunch of 2008 was partly due to incorrect modelling of the risks in such lending. This paper reviews the development of credit scoring,-the way of assessing risk in consumer finance-and what...