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The Impact of Bank Consolidation on Credit Supply and Performance

Sergio Mayordomo1; Nicola Pavanini2; Emanuele Tarantino3

1 Banco de España · 2 Tilburg University · 3 Luiss and EIEF, Italy, and European Commission ,

Review of Financial Studies 2026 open access

Abstract Between 2009 and 2011, the Spanish banking system underwent a restructuring process based on savings banks’ consolidation. The program’s design allows us to study how banks’ consolidation affects credit supply and performance. We propose a quasi-experimental analysis showing that bank mergers restrict credit supply and set higher interest rates but also reject fewer applicants and report fewer nonperforming loans. We then estimate a structural model of credit in which banks set interest rates and lending standards. We find that, despite the relaxation in their lending standards, merged banks’ credit performance improved thanks to a significant drop in their screening costs.

DOI
10.1093/rfs/hhaf107
Volume
39 (4)
Pages
1077-1115
Language
en
Export
BibTeX
Sources
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