Benefits of relationship banking: Evidence from consumer credit markets

submitted 7 months ago by to Economics,Monetary Economics
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Link: http://www.schollit.com/benefits-of-relationship-banking-evidence-from-consumer-credit-markets/

Using a unique panel dataset that contains comprehensive information about the relationships between a large bank and its credit card customers, we show that relationship accounts exhibit lower probabilities of default and attrition, and have higher utilization rates, than non-relationship accounts. Dynamic information about changes in the behavior of a customer’s other accounts at the same bank helps predict the behavior of the credit card account over time. These results imply that relationship banking offers significant potential benefits to banks: information the lender has at its disposal can be used to mitigate credit risk on the credit card account.

Sumit Agarwal, Souphala Chomsisengphet, Chunlin Liu, Changcheng Song, Nicholas S.Souleles
Journal of Monetary Economics

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