Loan Pricing: Do Borrowers Benefit from Cost-Efficient Banking?

Credit and Capital Markets, Forthcoming

36 Pages Posted: 17 Oct 2012 Last revised: 21 Nov 2015

See all articles by Tobias Schlueter

Tobias Schlueter

University of Cologne - Department of Banking & Finance

Ramona Busch

Deutsche Bundesbank

Soenke Sievers

Paderborn University

Thomas Hartmann-Wendels

University of Cologne - Department of Banking

Date Written: November 20, 2015

Abstract

This study examines the loan-pricing behavior of German banks for a large variety of retail and corporate loan products. We find that a bank’s operational efficiency is priced in bank loan rates and alters interest-setting behavior. Specifically, we establish that a higher degree of operational efficiency leads to lower loan markups, which makes prices more competitive and smoothes the setting of interest rates. By employing state-of-the-art stochastic frontier efficiency measures to capture a bank’s operational efficiency, we take a look at the bank customers’ perspective and demonstrate the extent to which bor-rowers benefit from cost-efficient banking.

Keywords: interest rate pass-through models, error correction models, bank efficiency, cost efficiency, stochastic frontier analysis

JEL Classification: G21, G28

Suggested Citation

Schlueter, Tobias and Busch, Ramona and Sievers, Soenke and Hartmann-Wendels, Thomas, Loan Pricing: Do Borrowers Benefit from Cost-Efficient Banking? (November 20, 2015). Credit and Capital Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2161958 or http://dx.doi.org/10.2139/ssrn.2161958

Tobias Schlueter

University of Cologne - Department of Banking & Finance ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
00492214701670 (Phone)

Ramona Busch

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Soenke Sievers (Contact Author)

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

HOME PAGE: http://www.upb.de/accounting

Thomas Hartmann-Wendels

University of Cologne - Department of Banking ( email )

Albertus-Magnus-Platz
D-50923 Cologne
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
139
Abstract Views
1,578
rank
215,857
PlumX Metrics