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Benefits of relationship banking: Evidence from consumer credit markets

submitted 3 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.

Author(s):
Sumit Agarwal, Souphala Chomsisengphet, Chunlin Liu, Changcheng Song, Nicholas S.Souleles
Publication:
Journal of Monetary Economics
Date
06/14/2018
DOI
10.1016/j.jmoneco.2018.02.005

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