Banking

This version: May 2007 Bank Geographic Diversification and sensitiveness of Lending to Monetary Shocks Micro-Evidence from U.S. County-Banking States Rocco R. Huang* ABSTRACT This paper provides empirical cause backup the view that bank geographic diversification reduces the sensitiveness of sum supply to financial shocks, and hence, the efficacy of the bank bring canalise of monetary policy transmission. The study covers 18 U.S. county-banking states, where banks cannot circumstances up branches outside their home counties, but some banks may do good from geographic diversification through their retentiveness company parents. ii types of banks coexist in local anesthetic agent markets: local banks and diversified banks (i.e., local subsidiaries of multi-county holding companies). Bank-level impart data (19771986) reveal that the diversified banks lending proves significantly smaller procyclicality across the course of a monetary cycle, even after absolute f or differences in size, liquidity, capitalization ratio and potential for securitization. The study push shows that diversified banks (need to) build up smaller liquidity buffers than do local banks during monetary alter, which may explain why their lending is little sensitive to repressive monetary shocks.

The local temper of lending in county-banking states allows us to control for local reliance involve based on the prediction of the interest-rate channel that counties with higher(prenominal) manufacturing employment share should exhibit more procyclical demand for credit. It is as well as shown that in t hese counties during monetary tightening the! disadvantage of local banks is less evident, because the depressed credit demand may reduce the relevance of supply-side constraints. * The University of Amsterdam. E-mail: rocco.huang@gmail.com. I am especially grateful to Stijn Claessens for his precise comments and advice. I would also interchangeable to thank Marco Arena, Mitchell Berlin, Nicola Cetorelli, Vidhi Chhaochharia, Jonathan...If you want to rifle a full essay, army it on our website: OrderCustomPaper.com

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