Search Results
Journal Article
Decline in consumer credit
Journal Article
Current topics: district bank performance; modeling complex products; student loans; the expansion of vendor management risk; consumer financial protection bureau issues final rules impacting mortgage servicing
The Federal Reserve Bank of Chicago's supervision group follows current and emerging risk trends on an on-going basis. This Risk Perspectives newsletter is designed to highlight a few current risk topics and some potential risk topics on the horizon for the Seventh District and its supervised financial institutions. The newsletter is not intended as an exhaustive list of the current or potential risk topics and should not be relied upon as such. We encourage each of our supervised financial institutions to remain informed about current and potential risks to its institution.
Journal Article
Driving a hard bargain
Tighter credit in the district may be adding to the woes of auto dealers.
Conference Paper
Information asymmetries and the effects of banking mergers of firm-bank relationships
This study examines the effects of mergers between commercial banks and investment banks on firm-bank relationships and the pricing of loan contracts, focusing on the role of information asymmetries. I find that, prior to a public securities issuance, junk rated firms are more likely to switch lenders to a merged commercial-investment bank when their existing lenders are pure commercial banks. Borrowers that issue public securities and are in local lending relationships are less likely to switch lenders after their bank merges with an investment bank. Also, when issuing public debt, ...
Report
Personal bankruptcy and credit market competition
The effect of credit market competition on borrower default is theoretically ambiguous, because the quantity of credit supplied may rise or fall following an increase in competition. We investigate empirically the relationship between credit market competition, lending to households, and personal bankruptcy rates in the United States. We exploit the exogenous variation in market contestability brought on by banking deregulation at the state level: after deregulation, banks faced the threat of entry into their state markets. We find that deregulation increased competition for borrowers, ...
Conference Paper
Making regulation work for consumers and banks
Working Paper
Risk-based pricing of interest rates in household loan markets
Focusing on observable default risk's role in loan terms and the subsequent consequences for household behavior, this paper shows that lenders increasingly used risk-based pricing of interest rates in consumer loan markets during the mid-1990s. It tests three resulting predictions. First, the premium paid per unit of risk should have increased over this period. Second, debt levels should react accordingly. Third, fewer high-risk households should be denied credit, further contributing to the interest rate spread between the highest- and lowest-risk borrowers. For those obtaining loans, the ...
Conference Paper
Consumer lending at community banks