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Sorry, We're Closed: Loan Conditions When Bank Branches Close and Firms Transfer to Another Bank

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  • Diana Bonfim
  • Gil Nogueira
  • Steven Ongena

Abstract

We study loan conditions when bank branches close and firms subsequently transfer to a branch of another bank in the vicinity. Such transfer loans allow us for the first time to observe the conditions granted when banks pool-price new applicants. Consistent with recent theoretical work on hold up in bank-firm relationships we find that transfer loans do not receive the discount in loan rates that prevails when firms otherwise switch banks. We hereby critically augment recent empirical evidence on dynamic cycles in loan rates.

Suggested Citation

  • Diana Bonfim & Gil Nogueira & Steven Ongena, 2016. "Sorry, We're Closed: Loan Conditions When Bank Branches Close and Firms Transfer to Another Bank," Working Papers w201607, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w201607
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    Cited by:

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    2. Anne Duquerroy & Clément Mazet-Sonilhac & Jean-Stéphane Mésonnier & Daniel Paravisini, 2022. "Bank Local Specialization," SciencePo Working papers hal-03812807, HAL.
    3. Paolo Emilio Mistrulli & Luca Antelmo & Maddalena Galardo & Iconio Garrì & Dario Pellegrino & Davide Revelli & Vito Savino, 2019. "Why do banks close? The geography of branch pruning," Questioni di Economia e Finanza (Occasional Papers) 540, Bank of Italy, Economic Research and International Relations Area.
    4. López-Espinosa, Germán & Mayordomo, Sergio & Moreno, Antonio, 2017. "When does relationship lending start to pay?," Journal of Financial Intermediation, Elsevier, vol. 31(C), pages 16-29.
    5. Gil Nogueira, 2016. "Bank Switching in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    6. Thorsten Beck & Samuel Da-Rocha-Lopes & André F Silva & Francesca Cornelli, 2021. "Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins [High wage workers and high wage firms]," Review of Financial Studies, Society for Financial Studies, vol. 34(4), pages 1747-1788.
    7. Diana Bonfim & Luísa Farinha & Sónia Félix, 2019. "Credit and the economy: lessons from a decade of research at Banco de Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    8. Iconio Garrì, 2019. "The effects of bank branch closures on credit relationships," Temi di discussione (Economic working papers) 1254, Bank of Italy, Economic Research and International Relations Area.
    9. Francesco Bripi, 2023. "The impact of credit substitution between banks on investment," Temi di discussione (Economic working papers) 1408, Bank of Italy, Economic Research and International Relations Area.
    10. Maddalena Galardo & Iconio Garrì & Paolo Emilio Mistrulli & Davide Revelli, 2021. "The geography of banking: Evidence from branch closings," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 50(1), February.
    11. Davide Arnaudo & Silvia Del Prete & Cristina Demma & Marco Manile & Andrea Orame & Marcello Pagnini & Carlotta Rossi & Paola Rossi & Giovanni Soggia, 2022. "The Digital Trasformation in the Italian Banking Sector," Questioni di Economia e Finanza (Occasional Papers) 682, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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