The objective of this paper is to identify the role of memory in repeated contracts with moral hazard in financial intermediation. We use the database we have built containing the contracts signed by the European Bank for Reconstruction and Development EBRD between 1991 and 2003. Our framework is a standard setting of repeated moral hazard. After having controlled for the adverse selection component, we are able to prove that client reputation is the discrimination device according to which the bank fixes the amount of credit for the established clients. Our results unambiguously isolate the effect of memory in the bank's lending decisions.R. Nicolini research is supported by Ramón y Cajal and by Barcelona Economics Program of XREA. Financial support from research grants 2005SGR00470 and SEJ2005-01427/ECON is acknowledged.Peer reviewed