Shocked by Bank Funding Shocks: Evidence from Consumer Credit Cards
Review of Financial Studies
85 Pages Posted: 15 Jan 2020 Last revised: 9 Mar 2023
Date Written: July 31, 2018
Abstract
Using the near universe of U.S. consumer credit cards, we show that banks transmit their wholesale funding shocks to consumers by reducing their credit card limits. Credit-constrained consumers who are unable to hedge against the transmitted shock by accessing other credit cards experience a stronger and more persistent reduction in aggregate credit card limits at the consumer level. Consequently, these credit-constrained consumers reduce their aggregate credit card borrowing. Our results document a credit card lending channel for the transmission of adverse bank shocks and show who bears the costs of fragile bank funding structures.
Keywords: bank funding shock, consumer credit cards, borrowing
JEL Classification: G21, G51
Suggested Citation: Suggested Citation