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The Prime Premium : Is Relationship Banking Too Costly for Some?

Author

Listed:
  • Beim, D-O

Abstract

The most important determinant of bank loan pricing is not borrower risk or other conventional variable but whether the interest rate is pegged to the Prime Rate or to a market index such as Livor. Controlling for the difference in level among such benchmarks, and for many other variables explanatory of bank loan pricing, Prime-based borrowers paid 140-150 basis points more on average during 1990-1995.

Suggested Citation

  • Beim, D-O, 1996. "The Prime Premium : Is Relationship Banking Too Costly for Some?," Papers 96-22, Columbia - Graduate School of Business.
    • Handle: RePEc:fth:colubu:96-22
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    Citations

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    Cited by:

    1. Charles W. Calomiris & Thanavut Pornrojnangkool, 2005. "Monopoly-Creating Bank Consolidation? The Merger of Fleet and BankBoston," NBER Working Papers 11351, National Bureau of Economic Research, Inc.
    2. Hubbard, R Glenn & Kuttner, Kenneth N & Palia, Darius N, 2002. "Are There Bank Effects in Borrowers' Costs of Funds? Evidence from a Matched Sample of Borrowers and Banks," The Journal of Business, University of Chicago Press, vol. 75(4), pages 559-581, October.
    3. Charles Calomiris & Thanavut Pornrojnangkool, 2009. "Relationship Banking and the Pricing of Financial Services," Journal of Financial Services Research, Springer;Western Finance Association, vol. 35(3), pages 189-224, June.

    More about this item

    Keywords

    BANKS ; LOANS ; INTEREST RATE;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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