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Banking Without Branches

Author

Listed:
  • Amberg, Niklas

    (Research Department, Central Bank of Sweden)

  • Becker, Bo

    (Stockholm School of Economics, CEPR and ECGI)

Abstract

The decline in cash use and growing use of digital distribution for retail banking leads to a reduced need for bank branches. Lending to small and medium sized firms (SMEs) has not benefited as much from a digital transformation, and widespread branch closures may reduce their supply of credit. Using the closing of two thirds of Swedish branches as a laboratory, we document that corporate lending declines rapidly following branch closures, mainly via reduced lending to small and young firms. The reduced credit supply has real effects: local firms experience a decline in employment and sales and an increase in exit risk after branch closures. Our results thus suggest that the disappearance of bank branches have far-reaching implications for the economy

Suggested Citation

  • Amberg, Niklas & Becker, Bo, 2024. "Banking Without Branches," Working Paper Series 430, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0430
    as

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    File URL: https://www.riksbank.se/globalassets/media/rapporter/working-papers/2023/no.-430-banking-without-branches.pdf
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    References listed on IDEAS

    as
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    2. Berger, Allen N, 2003. "The Economic Effects of Technological Progress: Evidence from the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 141-176, April.
    3. Imbens,Guido W. & Rubin,Donald B., 2015. "Causal Inference for Statistics, Social, and Biomedical Sciences," Cambridge Books, Cambridge University Press, number 9780521885881, January.
    4. Hoai-Luu Q. Nguyen, 2019. "Are Credit Markets Still Local? Evidence from Bank Branch Closings," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 1-32, January.
    5. José Luis Montiel Olea & Carolin Pflueger, 2013. "A Robust Test for Weak Instruments," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(3), pages 358-369, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Banks; branch closures; credit supply;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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