Service provision and loans: Price and risk implications

Emmanuelle Nys

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Abstract: Deregulation of the banking system has increased competition and prompted wide changes in the activities of banks. As revenue from intermediation activities of banks has decreased, banks have broadened the range of products they offer to their clients, which generate revenue other than interest margin. This paper offers a complementary explanation of the link between intermediation activities and service provision. We show that banks may be willing to decrease their lending rate, using loans as loss leader, and take on higher credit risk, in order to capture clients to whom they can sell services.

Keywords: bank interest margins; fee; based activities; asymmetric information (search for similar items in EconPapers)
Date: 2008
Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-00844824v1
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Citations: View citations in EconPapers (3)

Published in Revue d'économie politique, 2008, 118 (3), pp.411-428

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Journal Article: Service provision and loans: Price and risk implications (2008)
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