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Specialization in Banking

Author

Listed:
  • Blickle, Kristian
  • Parlatore Siritto, Cecilia
  • Saunders, Anthony

Abstract

Using supervisory data on the loan portfolios of large US banks, we document that these banks specialize by concentrating their lending disproportionately in a few industries. This specialization is consistent with banks having industry-specific knowledge, reflected in reduced risk of loan defaults, lower aggregate charge-offs, and higher propensity to lend to opaque firms in the preferred industry. Banks attract high-quality borrowers by offering generous loan terms in their specialized industry, especially to borrowers with alternative options. Banks focus on their preferred industry in times of instability and relatively lower tier 1 capital as well as after sudden surges in deposits.

Suggested Citation

  • Blickle, Kristian & Parlatore Siritto, Cecilia & Saunders, Anthony, 2025. "Specialization in Banking," CEPR Discussion Papers 20674, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:20674
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    File URL: https://cepr.org/publications/DP20674
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    Citations

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    Cited by:

    1. Blickle, Kristian & He, Zhiguo & Huang, Jing & Parlatore, Cecilia, 2025. "Information-based pricing in specialized lending," Journal of Financial Economics, Elsevier, vol. 172(C).
    2. Konrad Kuhmann, 2025. "Bank Specialization and the Transmission of Euro Area Monetary Policy," Working Papers 2025/06, Latvijas Banka.
    3. Li, Oliver Zhen & Lin, Yupeng & Zhang, Jinping & Zhang, Zilong, 2025. "Peer default and EDGAR searches," Journal of Corporate Finance, Elsevier, vol. 95(C).
    4. Vives, Xavier & Ye, Zhiqiang, 2025. "Fintech entry, lending market competition, and welfare," Journal of Financial Economics, Elsevier, vol. 168(C).

    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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