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Bank Consolidation and the Dynamics of Consumer Loan Interest Rates

Author

Listed:
  • Charles Kahn

    (University of Illinois)

  • Ben Sopranzetti

    (Rutgers University)

Abstract

This paper analyzes interest rates quoted by individual banks for personal and automobile loans in 10 cities. Personal loan rates are higher in concentrated markets, and banks involved in mergers reduce personal rates relative to their competitors prior to the merger's completion. This is consistent with mergers changing the size structure of personal loan markets and merger participants' desire to gain regulatory approval. Auto rates are unaffected by local concentration and mergers, suggesting that their market is nationwide. Rates for both loan types respond asymmetrically to changes in Treasury rates, being more sensitive to a rise than a fall.

Suggested Citation

  • Charles Kahn & Ben Sopranzetti, 2005. "Bank Consolidation and the Dynamics of Consumer Loan Interest Rates," The Journal of Business, University of Chicago Press, vol. 78(1), pages 99-134, January.
    • Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:1:p:99-134
    DOI: 10.1086/426521
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