Benefits of relationship banking: Evidence from consumer credit markets

Sumit Agarwal, Souphala Chomsisengphet, Chunlin Liu, Changcheng Song and Nicholas S. Souleles

Journal of Monetary Economics, 2018, vol. 96, issue C, 16-32

Abstract: Using a unique panel dataset that contains comprehensive information about the relationships between a large bank and its credit card customers, we show that relationship accounts exhibit lower probabilities of default and attrition, and have higher utilization rates, than non-relationship accounts. Dynamic information about changes in the behavior of a customer's other accounts at the same bank helps predict the behavior of the credit card account over time. These results imply that relationship banking offers significant potential benefits to banks: information the lender has at its disposal can be used to mitigate credit risk on the credit card account.

Keywords: Relationship banking; Credit cards; Deposits; Investments; Household finance (search for similar items in EconPapers)
JEL-codes: D14 G21 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:96:y:2018:i:c:p:16-32

DOI: 10.1016/j.jmoneco.2018.02.005

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