publication . Preprint . 2001

Bank Consolidation and Consumer Loan Interest Rates

Charles Kahn; George Pennacchi; Ben Sopranzetti;
Open Access
  • Published: 01 Mar 2001
Abstract
The recent wave of bank mergers has raised concern with its effect on competition. This paper examines the influence of concentration and merger activity on consumer loan interest rates. It uses Bank Rate Monitor, Inc. survey data on loan rates quoted weekly by large commercial banks in ten major U.S. cities during the 1989 to 1997 period. The pricing behavior of banks is analyzed for two types of loans: new automobile loans and unsecured personal loans. Market concentration is found to have a positive and significant impact on the level of personal loans, but not automobile loans. Consistent with the exercise of market power, we find that personal loan rates ri...

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