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Bank Consolidation and the Dynamics of Consumer Loan Interest Rates

  • Charles Kahn

    (University of Illinois)

  • Ben Sopranzetti

    (Rutgers University)

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.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB780103
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Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 78 (2005)
Issue (Month): 1 (January)
Pages: 99-134

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Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:1:p:99-134
Contact details of provider: Web page: http://www.journals.uchicago.edu/JB/

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