The behavior of consumer loan rates during the 1990 credit slowdown

This study re-examines the 1990 credit slowdown by investigating the loan pricing behavior of commercial banks. We find strong evidence that large, undercapitalized banks contributed to the credit slowdown by charging consumers a higher-than-average loan rate relative to better-capitalized instituti...

Full description

Saved in:
Bibliographic Details
Published in:Journal of banking & finance 1996-12, Vol.20 (10), p.1673-1694
Main Authors: Lown, Cara, Peristiani, Stavros
Format: Article
Language:English
Subjects:
Bank loans
Banking
BIS capital requirements
Commercial banks
Consumer credit
Consumer loan rates
Consumers
Credit
Credit crunch
Lending behavior
Loans
Statistical analysis
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This study re-examines the 1990 credit slowdown by investigating the loan pricing behavior of commercial banks. We find strong evidence that large, undercapitalized banks contributed to the credit slowdown by charging consumers a higher-than-average loan rate relative to better-capitalized institutions. This disparity in lending exists even after accounting for bank funding costs. Thus, we argue that there was a lending slowdown that occurred among large, undercapitalized banks. The reluctance to lend among undercapitalized banks is at least suggestive of behavior that is consistent with a credit crunch.
ISSN:0378-4266
1872-6372
DOI:10.1016/S0378-4266(96)00017-9