liabilities, it also has been mentioned as an instrument of monetary stability and control. Although this differentiation of reserve requirements was originally based on the general banking principle of matching the liquidity of assets and. Moreover, reserves are legally required to be held against both tpes of deposits, wiF lower requirements usually being applied to the latter. Read moreĬommercial bank deposits are most commonly classified as either demand deposits or time deposits. In other words, we identify existing relationships adding value both in terms of screening based on discretionary behavior of banks as well as in monitoring.
However, even after taking screening into account, prior relationships still have a first order impact in reducing borrower defaults. We find that banks' screening process is not deterministic but includes elements of subjective assessment or discretion which is associated with lower frequencies of defaults. We are able to access data on loan applications to assess how banks screen. Importantly, though, even the simplest forms of relationships such as transaction accounts (e.g., savings or checking accounts) are economically meaningful in reducing defaults, even after controlling for other borrower characteristics as well as internal and external credit scores. (transaction accounts, savings accounts, prior loans), in scope (credit and debit cards, credit lines), and depth (relationship length, utilization of credit line, money invested in savings account). We find relationships matter in different forms.
We find that loans of retail customers, who have a relationship with their savings bank prior to applying for a loan, default significantly less than customers with no prior relationship. This paper analyzes the importance of retail consumers' banking relationships for loan defaults using a unique, comprehensive dataset of over one million loans.
0 kommentar(er)
