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Service provision and loans : Price and risk implications


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  • Emmanuelle Nys


Deregulation of the banking system has increased competition and prompted wide changes in the activities of banks. As revenue from intermediation activities of banks has decreased, banks have broadened the range of products they offer to their clients, which generate revenue other than interest margin. This paper offers a complementary explanation of the link between intermediation activities and service provision. We show that banks may be willing to decrease their lending rate, using loans as loss leader, and take on higher credit risk, in order to capture clients to whom they can sell services.

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Bibliographic Info

Article provided by Dalloz in its journal Revue d'├ęconomie politique.

Volume (Year): Volume 118 (2008)
Issue (Month): 3 ()
Pages: 411-428

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Handle: RePEc:cai:repdal:redp_183_0411

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Related research

Keywords: bank interest margins; fee; based activities; asymmetric information;


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