Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance?

Research output: Contribution to journalArticle

Standard Standard

Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance? / Ashton, J.K.; Hudson, R.

In: International Journal of the Economics of Business, Vol. 21, No. 1, 06.02.2014, p. 121-138.

Research output: Contribution to journalArticle

HarvardHarvard

Ashton, JK & Hudson, R 2014, 'Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance?', International Journal of the Economics of Business, vol. 21, no. 1, pp. 121-138. https://doi.org/10.1080/13571516.2013.864118

APA

Ashton, J. K., & Hudson, R. (2014). Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance? International Journal of the Economics of Business, 21(1), 121-138. https://doi.org/10.1080/13571516.2013.864118

CBE

Ashton JK, Hudson R. 2014. Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance?. International Journal of the Economics of Business. 21(1):121-138. https://doi.org/10.1080/13571516.2013.864118

MLA

Ashton, J.K. and R. Hudson. "Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance?". International Journal of the Economics of Business. 2014, 21(1). 121-138. https://doi.org/10.1080/13571516.2013.864118

VancouverVancouver

Ashton JK, Hudson R. Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance? International Journal of the Economics of Business. 2014 Feb 6;21(1):121-138. https://doi.org/10.1080/13571516.2013.864118

Author

Ashton, J.K. ; Hudson, R. / Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance?. In: International Journal of the Economics of Business. 2014 ; Vol. 21, No. 1. pp. 121-138.

RIS

TY - JOUR

T1 - Do Lenders Cross-Subsidise Loans by Selling Payment Protection Insurance?

AU - Ashton, J.K.

AU - Hudson, R.

PY - 2014/2/6

Y1 - 2014/2/6

N2 - This study examines the recent UK regulatory decision to ban the joint provision of consumer lending and payment protection or credit insurance (hereafter PPI). This case has wide regulatory implications following concerns that the sale of PPI has been detrimental to customers due to overpriced PPI and a cross-subsidy flowing from PPI to unsecured lending. The study examines whether interest rate setting of unsecured lending is influenced by banks issuing PPI or otherwise to help establish whether such cross-subsidies have been made. This assessment is undertaken over time for a diverse and comprehensive selection of banks offering unsecured lending with and without PPI between 1998 and 2011 for three levels of borrowing. It is reported that offering PPI is a significant explanatory variable of unsecured lending interest rate levels. When unsecured lending is offered with PPI, interest rates are lower, a finding consistent with a cross-subsidy flowing from PPI remiums to unsecured lending.

AB - This study examines the recent UK regulatory decision to ban the joint provision of consumer lending and payment protection or credit insurance (hereafter PPI). This case has wide regulatory implications following concerns that the sale of PPI has been detrimental to customers due to overpriced PPI and a cross-subsidy flowing from PPI to unsecured lending. The study examines whether interest rate setting of unsecured lending is influenced by banks issuing PPI or otherwise to help establish whether such cross-subsidies have been made. This assessment is undertaken over time for a diverse and comprehensive selection of banks offering unsecured lending with and without PPI between 1998 and 2011 for three levels of borrowing. It is reported that offering PPI is a significant explanatory variable of unsecured lending interest rate levels. When unsecured lending is offered with PPI, interest rates are lower, a finding consistent with a cross-subsidy flowing from PPI remiums to unsecured lending.

U2 - 10.1080/13571516.2013.864118

DO - 10.1080/13571516.2013.864118

M3 - Article

VL - 21

SP - 121

EP - 138

JO - International Journal of the Economics of Business

T2 - International Journal of the Economics of Business

JF - International Journal of the Economics of Business

SN - 1357-1516

IS - 1

ER -