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Are Credit Unions Just Small Banks? Determinants of Loan Rates in Local Consumer Lending Markets

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Author Info
Robert M. Feinberg () (American University)
A.F.M. Ataur Rahman (North-South University)

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Abstract

Only recently have studies of banking markets paid attention to the potential competitive discipline provided by credit unions on consumer loan rates. However, an unresolved issue is the extent to which credit unions are substitutable for banks. We analyze a combined sample of 100 banks and 187 credit union in 68 U.S. markets observed quarterly over the 1992-1998 period, to explain loan rates for two types of consumer loans. Our results suggest that, even after controlling for market shares and deposit sizes of institutions, credit unions charge their members significantly lower interest rates on loans than do banks. Furthermore, an examination of the pattern of responses to lagged interest rates yields an indication of greater inertia in rate-setting by credit unions than by banks.

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File URL: http://college.holycross.edu/eej/Volume32/V32N4P647_659.pdf
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Publisher Info
Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 32 (2006)
Issue (Month): 4 (Fall)
Pages: 647-659
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Handle: RePEc:eej:eeconj:v:32:y:2006:i:4:p:647-659

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Dean F. Amel & Martha Starr-McCluer, 2001. "Market definition in banking: recent evidence," Finance and Economics Discussion Series 2001-16, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  2. Gilbert, R Alton, 1984. "Bank Market Structure and Competition: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 617-44, November. [Downloadable!] (restricted)
  3. Feinberg, Robert M. & Rahman, A. F. M. Ataur, 2001. "A causality test of the relationship between bank and credit union lending rates in local markets," Economics Letters, Elsevier, vol. 71(2), pages 271-275, May. [Downloadable!] (restricted)
  4. Katerina Simons & Joanna Stavins, 1998. "Has antitrust policy in banking become obsolete?," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 13-26. [Downloadable!]
  5. Timothy H. Hannan & Robin A. Prager, 2001. "The competitive implications of multimarket bank branching," Finance and Economics Discussion Series 2001-43, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  6. William R. Emmons & Frank A. Schmid, 2000. "Bank competition and concentration: do credit unions matter?," Review, Federal Reserve Bank of St. Louis, issue May, pages 29-42. [Downloadable!]
  7. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," Harvard Institute of Economic Research Working Papers 1816, Harvard - Institute of Economic Research.
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  8. Navratil, Frank J, 1981. "An Aggregate Model of the Credit Union Industry," Journal of Finance, American Finance Association, vol. 36(2), pages 539-49, May. [Downloadable!] (restricted)
  9. Feinberg, Robert M, 1985. ""Sales-at-Risk": A Test of the Mutual Forebearance Theory of Conglomerate Behavior," Journal of Business, University of Chicago Press, vol. 58(2), pages 225-41, April. [Downloadable!] (restricted)
  10. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yamin Ahmad & Russell Kashian, 2008. "Modeling the Time to an Initial Public Offering: When does the Fruit Ripen?," Working Papers 08-01, UW-Whitewater, Department of Economics. [Downloadable!]
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