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Competition, financial innovation and commercial bank loan portfolios

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  • Zarutskie, Rebecca

Abstract

I examine how US commercial bank loan portfolios change in response to the rise of securitization markets and banking market deregulations over 1976–2003. Banks increasingly tilt their portfolios toward real-estate-backed loans. However, there are significant differences across banks. Larger banks and younger banks disproportionately shift their lending toward real-estate-backed loans, particularly commercial real-estate-backed loans, whereas smaller banks and older banks maintain greater shares of their loan portfolios in commercial and personal loans. When larger banks make more real-estate-backed loans, they charge lower interest rates, consistent with these banks lowering the costs of lending and expanding credit for borrowers. In contrast, smaller banks charge higher interest rates, consistent with these banks restricting lending to a select group of borrowers.

Suggested Citation

  • Zarutskie, Rebecca, 2013. "Competition, financial innovation and commercial bank loan portfolios," Journal of Financial Intermediation, Elsevier, vol. 22(3), pages 373-396.
  • Handle: RePEc:eee:jfinin:v:22:y:2013:i:3:p:373-396
    DOI: 10.1016/j.jfi.2013.02.001
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    Cited by:

    1. Florian LEON, 2015. "What do we know about the role of bank competition in Africa?," Working Papers 201516, CERDI.
    2. repec:eee:riibaf:v:41:y:2017:i:c:p:90-104 is not listed on IDEAS
    3. Andrieş, Alin Marius & Căpraru, Bogdan, 2014. "The nexus between competition and efficiency: The European banking industries experience," International Business Review, Elsevier, vol. 23(3), pages 566-579.
    4. repec:eee:jfinin:v:32:y:2017:i:c:p:45-59 is not listed on IDEAS
    5. Aysan, Ahmet F. & Disli, Mustafa & Ng, Adam & Ozturk, Huseyin, 2016. "Is small the new big? Islamic banking for SMEs in Turkey," Economic Modelling, Elsevier, vol. 54(C), pages 187-194.
    6. Woon Sau Leung & Nicholas Taylor, 2013. "Testing for contagion: the impact of US structured markets on international financial markets," Chapters,in: Handbook of Research Methods and Applications in Empirical Finance, chapter 11, pages 256-284 Edward Elgar Publishing.

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