Stakeholders’ Aversion to Inequality and Bank Lending to Minorities

Matteo Crosignani and Hanh Le

No 1079, Staff Reports from Federal Reserve Bank of New York

Abstract: We document large and persistent cross-sectional differences in banks’ propensity to lend to minorities based on bank stakeholders’ aversion to inequality. Using mortgage application data from the Home Mortgage Disclosure Act, we show that banks with more inequality-averse stakeholders are more likely to approve applications in high-minority relative to low-minority areas and, within census tracts, from non-white borrowers relative to white borrowers. These differences (i) are not driven by applicant selection or loan officer assignment, (ii) coincide with stakeholder alignment, reflected in depositor retention and disclosure of initiatives for underserved communities, and (iii) do not predict worse ex-post loan performance.

Keywords: inequality aversion; mortgage lending; minority borrowers (search for similar items in EconPapers)
JEL-codes: E51 J15 (search for similar items in EconPapers)
Pages: 68
Date: 2023-11-01
New Economics Papers: this item is included in nep-ban and nep-ure
Note: Revisded March 2026.
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Citations: View citations in EconPapers (1)

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DOI: 10.59576/sr.1079

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