The impact of banks' expanded securities powers on small‐business lending

David P. Ely and Kenneth Robinson

Review of Financial Economics, 2004, vol. 13, issue 1-2, 79-102

Abstract: The Gramm–Leach–Bliley Act (GLB) repealed many of the Glass–Steagall restrictions separating commercial and investment banking. We explore whether the ability of commercial banking organizations to conduct securities underwriting has lead to greater small‐business lending at banks with securities affiliates. We hypothesize that this effect on small‐business lending might emerge from greater incentives to engage in relationship lending. Our test results are inconsistent with this hypothesis. Banks with a securities affiliate and with less than $1 billion in assets record lower portfolio proportions of small‐business lending than banks without a securities affiliate. For larger banks, the differences between small‐business lending proportions at banks with and without a securities affiliate are not statistically different when considering the smaller loan categories. Large banks with securities affiliates, though, record significantly lower portfolio proportions of both the largest category of small‐business loans and total small‐business loans.

Date: 2004
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https://doi.org/10.1016/j.rfe.2003.07.001

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:13:y:2004:i:1-2:p:79-102

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