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Service provision and loans : Price and risk implications

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  • Emmanuelle Nys

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

Deregulation of the banking system has increased competition and prompted wide changes in the activities of banks. As revenue from intermediation activities of banks has decreased, banks have broadened the range of products they offer to their clients, which generate revenue other than interest margin. This paper offers a complementary explanation of the link between intermediation activities and service provision. We show that banks may be willing to decrease their lending rate, using loans as loss leader, and take on higher credit risk, in order to capture clients to whom they can sell services.

Suggested Citation

  • Emmanuelle Nys, 2008. "Service provision and loans : Price and risk implications," Post-Print hal-00844824, HAL.
    • Handle: RePEc:hal:journl:hal-00844824
    Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-00844824v1
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    References listed on IDEAS

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    1. de Lis, Santiago Fernández & García-Herrero, Alicia, 2013. "Dynamic provisioning: a buffer rather than a countercyclical tool?," LSE Research Online Documents on Economics 123220, London School of Economics and Political Science, LSE Library.
    2. Santiago Fernández de Lis & Alicia García-Herrero, 2012. "Dynamic Provisioning: Some Lessons from Experience," Chapters, in: Masahiro Kawai & David G. Mayes & Peter Morgan (ed.), Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia, chapter 4, Edward Elgar Publishing.
    3. Santiago Fernández de Lis & Alicia Garcia-Herrero, 2010. "Dynamic provisioning: Some lessons from existing experiences," Working Papers 1014, BBVA Bank, Economic Research Department.
    4. de la Torre, Augusto, 2013. "Comment," LSE Research Online Documents on Economics 123229, London School of Economics and Political Science, LSE Library.
    5. Busch, Ramona & Koziol, Philipp & Mitrovic, Marc, 2015. "Many a little makes a mickle: Macro portfolio stress test for small and medium-sized German banks," Discussion Papers 23/2015, Deutsche Bundesbank.
    6. Busch, Ramona & Koziol, Philipp & Mitrovic, Marc, 2018. "Many a little makes a mickle: Stress testing small and medium-sized German banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 237-253.

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