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Shocked by Bank Funding Shocks: Evidence from Consumer Credit Cards

Author

Listed:
  • Sudheer Chava
  • Rohan Ganduri
  • Nikhil Paradkar
  • Linghang Zeng
  • Itay Goldstein

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.

Suggested Citation

  • Sudheer Chava & Rohan Ganduri & Nikhil Paradkar & Linghang Zeng & Itay Goldstein, 2023. "Shocked by Bank Funding Shocks: Evidence from Consumer Credit Cards," The Review of Financial Studies, Society for Financial Studies, vol. 36(10), pages 3906-3952.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:10:p:3906-3952.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad039
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    More about this item

    Keywords

    G20; G21; G28; G50; G51;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G50 - Financial Economics - - Household Finance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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