Market Structure and the Availability of Credit: Evidence from Auto Credit

Abstract

How do changes in market structure impact accessibility to credit? Following the introduction of publicly disclosed Comprehensive Capital Analysis and Review stress tests, market shares of affected banks shrunk by about 2.1 pp. Impact significantly differs across regions, with shares dropping an additional 1.1 pp in non-urban areas. Credit substitution by other lenders is imperfect. Originations drop in areas more reliant on CCAR credit. Borrowing conditions diverge as well: non-urban counties see fewer subprime originations and average borrowing costs rise. Our results suggest that policies geared toward financial stability asymmetrically impacted local credit conditions and inadvertently amplified the urban-rural divide.

Keywords: Household finance, consumer credit, stress tests, availability of credit, market structure

JEL Classification: G51, G28, G21, G23, R51