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Population Aging and Bank Risk-Taking

Author

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  • Doerr, Sebastian
  • Kabaş, Gazi
  • Ongena, Steven

Abstract

What are the implications of an aging population for financial stability? To examine this question, we exploit geographic variation in aging across U.S. counties. We establish that banks with higher exposure to aging counties increase loan-to-income ratios. Laxer lending standards lead to higher nonperforming loans during downturns, suggesting higher credit risk. Inspecting the mechanism shows that aging drives risk-taking through two contemporaneous channels: deposit inflows due to seniors’ propensity to save in deposits; and depressed local investment opportunities due to seniors’ lower credit demand. Banks thus look for riskier clients, especially in counties where they operate no branches.

Suggested Citation

  • Doerr, Sebastian & Kabaş, Gazi & Ongena, Steven, 2024. "Population Aging and Bank Risk-Taking," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(7), pages 3037-3061, November.
    • Handle: RePEc:cup:jfinqa:v:59:y:2024:i:7:p:3037-3061_2
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    Cited by:

    1. Ma, Zhilong & Jiao, Ruoshui & DongZhi, CaiRang, 2025. "Population aging, financial literacy and household consumption," Finance Research Letters, Elsevier, vol. 85(PB).
    2. Patrick A. Imam & Christian Schmieder, 2026. "Aging gracefully: steering the banking sector through demographic shifts," Applied Economics, Taylor & Francis Journals, vol. 58(9), pages 1778-1795, February.
    3. Matthew D Eisenberg & Alexander McCourt & Elizabeth A Stuart & Lainie Rutkow & Kayla N Tormohlen & Michael I Fingerhood & Luis Quintero & Sarah A White & Emma Elizabeth McGinty, 2021. "Studying how state health services delivery policies can mitigate the effects of disasters on drug addiction treatment and overdose: Protocol for a mixed-methods study," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-16, December.
    4. Aden Kadir & Dirir Sadik Aden, 2023. "Charting the Course for Sustainable Aging: Socio-Environmental and Economic Impacts on Djiboutian Elderly Population," Culture. Society. Economy. Politics, Sciendo, vol. 3(1), pages 10-36, June.
    5. Sebastian Doerr & Thomas Drechsel & Donggyu Lee, 2021. "Income inequality, financial intermediation, and small firms," BIS Working Papers 944, Bank for International Settlements.
    6. Yavuz Arslan & Ahmet Degerli & Gazi Kabas, 2025. "Unintended Consequences of Unemployment Insurance Benefits: The Role of Banks," Management Science, INFORMS, vol. 71(4), pages 2847-2866, April.
    7. Lugo, Stefano, 2025. "Inequality and capital structure," Journal of Banking & Finance, Elsevier, vol. 174(C).
    8. Shuichiro NISHIOKA & Toshihiro OKUBO & Mari TANAKA, 2026. "Aging and Manufacturing," Discussion papers 26042, Research Institute of Economy, Trade and Industry (RIETI).
    9. Lo, Andrew W. & Thakor, Richard T., 2023. "Financial intermediation and the funding of biomedical innovation: A review," Journal of Financial Intermediation, Elsevier, vol. 54(C).
    10. Sarah Yanyue Yu, 2021. "An In Medias Res Economic Cost‐Benefit Analysis of ACT Container Deposit Scheme," Economic Papers, The Economic Society of Australia, vol. 40(1), pages 78-90, March.
    11. Daisuke TSURUTA, 2026. "Credit Allocation for SMEs in an Aging Economy: Evidence from the COVID-19 and Global Financial Crises in Japan," Discussion papers 26039, Research Institute of Economy, Trade and Industry (RIETI).
    12. Wang, Hua & Chen, Yaorui, 2024. "The impact of population aging on capital structure decisions and capital market efficiency: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 95(PB).

    More about this item

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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