Banking

This version: May 2007 Bank Geographic Diversification and sensitivity of Lending to Monetary Shocks Micro-Evidence from U.S. County-Banking States Rocco R. Huang* ABSTRACT This paper provides empirical distinguish backup the view that bank geographic diversification reduces the sensitivity of bring in 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 fructify up branches outside their home counties, but some banks whitethorn do good from geographic diversification through their retentivity company parents. ii types of banks coexist in local anesthetic markets: local banks and diversified banks (i.e., local subsidiaries of multi-county holding companies). Bank-level impart info (19771986) reveal that the diversified banks lending proves significantly smaller procyclicality crossways the course of a monetary cycle, even after compul sory for differences in size, liquidity, capitalization ratio and potential for securitization. The study come on 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 disposition of lending in county-banking states allows us to control for local denotation 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 too shown that in these counties during monetary tight! ening 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 expatiate comments and advice. I would also interchangeable to thank Marco Arena, Mitchell Berlin, Nicola Cetorelli, Vidhi Chhaochharia, Jonathan...If you want to touch on a full essay, army it on our website: OrderCustomPaper.com

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