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Sudheer Chava, Rohan Ganduri, Nikhil Paradkar, Linghang Zeng, Shocked by Bank Funding Shocks: Evidence from Consumer Credit Cards, The Review of Financial Studies, Volume 36, Issue 10, October 2023, Pages 3906–3952, https://doi.org/10.1093/rfs/hhad039
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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.
Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
