{"title":"Big Broad Banks: How Does Cross-Selling Affect Lending?","authors":"Yingjie Qi","doi":"10.2139/ssrn.3074343","DOIUrl":null,"url":null,"abstract":"\n This paper investigates how cross-selling affects relationship lending using internal data from a large bank and the Swedish credit registry. I show that within a bank-firm relationship, profit earned from non-loan products cross-subsidizes loans and increases (1) credit supply and (2) the likelihood of the bank’s pausing or waiving interest payments for delinquent loans (lenience in delinquency). For identification, I exploit the Basel II-induced exogenous variation in products’ profitability while holding constant the firm’s creditworthiness and relationship informativeness. I find that the average affected firm experienced a decrease of 6% ($400,000) in credit supply and 30% (9.8 pp) in lenience in delinquency. The results highlight the importance of cross-subsidization as a mechanism through which cross-selling affects bank-firm relationships and inform optimal regulatory design for lenders who multi-produce.","PeriodicalId":331807,"journal":{"name":"Banking & Insurance eJournal","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2021-04-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"2","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Banking & Insurance eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3074343","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 2
Abstract
This paper investigates how cross-selling affects relationship lending using internal data from a large bank and the Swedish credit registry. I show that within a bank-firm relationship, profit earned from non-loan products cross-subsidizes loans and increases (1) credit supply and (2) the likelihood of the bank’s pausing or waiving interest payments for delinquent loans (lenience in delinquency). For identification, I exploit the Basel II-induced exogenous variation in products’ profitability while holding constant the firm’s creditworthiness and relationship informativeness. I find that the average affected firm experienced a decrease of 6% ($400,000) in credit supply and 30% (9.8 pp) in lenience in delinquency. The results highlight the importance of cross-subsidization as a mechanism through which cross-selling affects bank-firm relationships and inform optimal regulatory design for lenders who multi-produce.