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Small Bank Lending in the Era of Fintech and Shadow Banks: A Sideshow?

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  • Taylor A Begley
  • Kandarp Srinivasan

Abstract

Amid the emerging dominance of nonbanks, small banks use key financing advantages to persist in the mortgage market. We provide evidence of the heterogeneous impact of two shocks to the supply of mortgage credit: postcrisis regulatory burden and GSE financing cost changes. Small banks exploit regulation disproportionately affecting the largest four banks (Big4) and their ability to lend on balance sheet to strongly substitute for the retreating Big4. The erasure of guarantee fee (g-fee) discounts for large lenders facilitates small bank growth in GSE lending. Small banks also grow balance sheet loans in areas more exposed to g-fee hikes.

Suggested Citation

  • Taylor A Begley & Kandarp Srinivasan, 2022. "Small Bank Lending in the Era of Fintech and Shadow Banks: A Sideshow?," The Review of Financial Studies, Society for Financial Studies, vol. 35(11), pages 4948-4984.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:11:p:4948-4984.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhac038
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    Citations

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    Cited by:

    1. Tan, Zhuohong & Wang, Handi & Hong, Yunzhe, 2023. "Does bank FinTech improve corporate innovation?," Finance Research Letters, Elsevier, vol. 55(PA).
    2. Paul Beaumont & Huan Tang & Eric Vansteenberghe, "undated". "Effets collatéraux : le rôle des Fintechs dans le financement des petites et moyennes entreprises," Analyse et synthèse 157, Banque de France.
    3. Paul Beaumont & Huan Tang & Éric Vansteenberghe, 2024. "Collateral Effects: The Role of FinTech in Small Business Lending [Effets collatéraux : le rôle des Fintechs dans le financement des petites et moyennes entreprises]," Débats économiques et financiers 42, Banque de France.
    4. Li, Linwen & Gao, Wei & Gu, Wanhong, 2023. "Fintech, bank concentration and commercial bank profitability: Evidence from Chinese urban commercial banks," Finance Research Letters, Elsevier, vol. 57(C).
    5. W. Scott Frame & Kristopher Gerardi & Erik J. Mayer & Billy Xu & Lawrence Zhao, 2024. "Government Litigation Risk and the Decline in Low-Income Mortgage Lending," FRB Atlanta Working Paper 2024-6, Federal Reserve Bank of Atlanta.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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