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Population aging and bank risk-taking

Sebastian Doerr, Gazi Kabaş and Steven Ongena

No 1050, BIS Working Papers from Bank for International Settlements

Abstract: What are the implications of an aging population for financial stability? To examine this question, we exploit geographic variation in aging across U.S. counties. We establish that banks with higher exposure to aging counties increase loan-to-income ratios, especially where they operate no branches. Laxer lending standards also lead to higher nonperforming loans during downturns, suggesting higher credit risk. Inspecting the mechanism shows that aging drives risk-taking through two contemporaneous channels: deposit in ows due to seniors' propensity to save in deposits; and depressed local investment opportunities due to seniors' lower credit demand. Banks thus look for riskier clients in no-branch counties.

Keywords: risk-taking; financial stability; low interest rates; population aging; demographics. (search for similar items in EconPapers)
JEL-codes: E51 G21 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2022-11
New Economics Papers: this item is included in nep-age, nep-ban, nep-dem, nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Population aging and bank risk-taking (2022) Downloads
Working Paper: Population Aging and Bank Risk-Taking (2020) Downloads
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