Bank Consolidation and the Dynamics of Consumer Loan Interest Rates

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 consi...

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Veröffentlicht in:The Journal of business (Chicago, Ill.) Ill.), 2005-01, Vol.78 (1), p.99-134
Hauptverfasser: Kahn, Charles, Pennacchi, George, Sopranzetti, Ben
Format: Artikel
Sprache:eng
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Zusammenfassung: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.
ISSN:0021-9398
1537-5374
DOI:10.1086/426521