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
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