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Benefits of relationship banking: Evidence from consumer credit markets

Author

Listed:
  • Agarwal, Sumit
  • Chomsisengphet, Souphala
  • Liu, Chunlin
  • Song, Changcheng
  • Souleles, Nicholas S.

Abstract

Using a unique panel dataset that contains comprehensive information about the relationships between a large bank and its credit card customers, we show that relationship accounts exhibit lower probabilities of default and attrition, and have higher utilization rates, than non-relationship accounts. Dynamic information about changes in the behavior of a customer's other accounts at the same bank helps predict the behavior of the credit card account over time. These results imply that relationship banking offers significant potential benefits to banks: information the lender has at its disposal can be used to mitigate credit risk on the credit card account.

Suggested Citation

  • Agarwal, Sumit & Chomsisengphet, Souphala & Liu, Chunlin & Song, Changcheng & Souleles, Nicholas S., 2018. "Benefits of relationship banking: Evidence from consumer credit markets," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 16-32.
    • Handle: RePEc:eee:moneco:v:96:y:2018:i:c:p:16-32
    DOI: 10.1016/j.jmoneco.2018.02.005
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    More about this item

    Keywords

    Relationship banking; Credit cards; Deposits; Investments; Household finance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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