Specialization in Banking

Kristian Blickle, Cecilia Parlatore Siritto and Anthony Saunders

No 20674, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using supervisory data on the loan portfolios of large US banks, we document that these banks specialize by concentrating their lending disproportionately in a few industries. This specialization is consistent with banks having industry-specific knowledge, reflected in reduced risk of loan defaults, lower aggregate charge-offs, and higher propensity to lend to opaque firms in the preferred industry. Banks attract high-quality borrowers by offering generous loan terms in their specialized industry, especially to borrowers with alternative options. Banks focus on their preferred industry in times of instability and relatively lower tier 1 capital as well as after sudden surges in deposits.

JEL-codes: D4 G20 G21 (search for similar items in EconPapers)
Date: 2025-09
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