New CERMi-CEB Working Paper by Amélie Artis and SOCENT professor Simon Cornée available on-line

Composition, Interpretation and Memorisation of the Idiosyncratic Knowledge in Social Banking”, by Amélie Artis and SOCENT professor Simon Cornée, is now available for download.

Abstract: Idiosyncratic knowledge, defined as the internal knowledge produced by a bank on each of its borrowers, is at the heart of the financial intermediation process. Nonetheless, the way bank managers use information in the credit-granting process remains a black box in the existing econometric studies. On the basis of a statistical textual analysis conducted on prior-to-credit committee notices of 52 credit files stemming from a social bank, this paper offers three main contributions. First, the authors show that the social bank under scrutiny produces a rich idiosyncratic knowledge, mainly composed of soft information. Secondly, they reveal how the qualitative and the quantitative dimensions of the idiosyncratic knowledge are used when credit conditions are determined; hierarchy plays a key role in this process of interpretation. Thirdly, their results indicate that the bank relies on an information system as well as on its agents’ cognitive abilities to memorise the idiosyncratic knowledge it produces. In this respect, the research points out deficiencies in the bank’s organisational memory and suggests some directions to remedy them.