Discussion Paper

Banking Deserts, Branch Closings, and Soft Information


Abstract: U.S. banks have shuttered nearly 5,000 branches since the financial crisis, raising concerns that more low-income and minority neighborhoods may be devolving into ?banking deserts? with inadequate, or no, mainstream financial services. We investigate this issue and also ask whether such neighborhoods are particularly exposed to branch closings?a development that, according to recent research, could reduce credit access, even with other branches present, by destroying ?soft? information about borrowers that influences lenders? credit decisions. Our findings are mixed, suggesting that further study of these concerns is warranted.

Keywords: crisis; Soft information; banks; branches; deserts;

JEL Classification: D1; G2;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2016-03-07

Number: 20160307