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Population aging and bank risk-taking

Sebastian Doerr, Gazi Kabaş and Steven Ongena

MPRA Paper from University Library of Munich, Germany

Abstract: Does population aging affect bank lending? To answer this question we exploit geographic variation in population aging across U.S. counties to provide the first evidence on its impact on bank risk-taking. We find that banks more exposed to aging counties experience deposit inflows due to seniors' higher savings rate. They consequently extend more credit, but relax lending standards: Loan-to-income ratios increase and application rejection rates decline. Exposed banks also see a sharper rise in nonperforming loans during downturns, suggesting that population aging may lead to financial instability. These results are in line with an increase in savings and a decline in investment opportunities induced by population aging.

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)
Date: 2022
New Economics Papers: this item is included in nep-age, nep-cfn, nep-dem, nep-fdg, nep-fle and nep-mac
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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