Competition, financial innovation and commercial bank loan portfolios

I examine how US commercial bank loan portfolios change in response to the rise of securitization markets and banking market deregulations over 1976–2003. Banks increasingly tilt their portfolios toward real-estate-backed loans. However, there are significant differences across banks. Larger banks a...

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Bibliographic Details
Published in:Journal of financial intermediation 2013-07, Vol.22 (3), p.373-396
Main Author: Zarutskie, Rebecca
Format: Article
Language:English
Subjects:
Bank loans
Banks
Commercial banks
Financial innovation
Interest rates
Loans
Portfolio analysis
Portfolio management
Real estate credit
Regulation of financial institutions
Studies
U.S.A
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Summary:I examine how US commercial bank loan portfolios change in response to the rise of securitization markets and banking market deregulations over 1976–2003. Banks increasingly tilt their portfolios toward real-estate-backed loans. However, there are significant differences across banks. Larger banks and younger banks disproportionately shift their lending toward real-estate-backed loans, particularly commercial real-estate-backed loans, whereas smaller banks and older banks maintain greater shares of their loan portfolios in commercial and personal loans. When larger banks make more real-estate-backed loans, they charge lower interest rates, consistent with these banks lowering the costs of lending and expanding credit for borrowers. In contrast, smaller banks charge higher interest rates, consistent with these banks restricting lending to a select group of borrowers.
ISSN:1042-9573
1096-0473
DOI:10.1016/j.jfi.2013.02.001