Title: Transactions accounts and loan monitoring
Description: "We provide evidence that transactions  accounts help financial intermediaries monitor borrowers by offering lenders a  continuous stream of data on borrowers' account balances.  This information  is most readily available to commercial banks, but other intermediaries, such  as finance companies, also have access to such information at a cost.  Using a  unique set of data that includes monthly and annual information on  small-business borrowers at an anonymous Canadian bank, we provide empirical  evidence that transactions account information helps the bank to monitor  commercial borrowers' operating loans and we show the direct mechanism  through which an intermediary can use this information in monitoring and  controlling moral hazard problems associated with a rising probability of  bankruptcy"--Federal Reserve Bank of Philadelphia web site.
Subjects: Bank loans