Deposit Market Power, Funding Stability and Long-Term Credit

Seminar abstract

This paper shows that by reducing the cyclicality of deposit funding and internal funds (profits), deposit market power reduces banks’ funding risk and provides the flexibility to originate long-term loans. Banks with deposit HHI one standard deviation above average extend loans with about 20% longer maturity than those one standard deviation below average. Deposit market power also allows banks to charge lower maturity premiums. This has real effects: access to banks raising funds in less competitive markets improves growth in bank-dependent borrowers needing long-term finance. Deposit market power, by stabilizing bank funding costs, helps alleviate credit cycles.

How to attend this seminar

This seminar is free to attend.

We ask that you contact Dr Anna Sarkisyan for details on how to join.

Speaker bio

Elena Loutskina is a Professor of Business Administration at the University of Virginia Darden School of Business. She holds a PhD in Finance from Boston College. Elena’s research focuses on financial intermediation. Her papers have addressed topics in consumer finance, mortgage markets, small business lending, and regulation of financial intermediaries, and have been published in top academic journals including the Journal of Finance, Review of Financial Studies, and the Journal of Financial Economics. Elena was a visiting scholar at the Federal Reserve Bank of Cleveland, ECB, and Office of Financial Research. She is a co-editor for the Journal of Financial Intermediation and an associate editor for the Journal of Empirical Finance.