Credit union loan rate determinants following the 2008 financial crisis

Abstract

Previous studies show that a variety of institutional and market variables influence cross-sectional variation in the interest rates that credit unions charge on loans. This study examines the behavior of loan interest rates using nationwide credit union data for the fourth quarter of 2009 in the United States. Results from this sample of more than 6,700 individual credit unions corroborate earlier research indicating that credit union competition tends to suppress loan rates and that economies of scale exist at these financial intermediaries. In contrast to prior studies, however, credit unions with higher net worth ratios are found to charge higher interest rates on loans.

JEL classification:

• E43 Determination of interest rates
• G21 Banks and other depository institutions
• M21 Business economics

Keywords:

• Credit unions
• Interest rates
• Consumer lending
• Financial crisis

Acknowledgements

Financial support for this research was provided by El Paso Water Utilities, Hunt Communities, City of El Paso Office of Management & Budget, UTEP Center for the Study of Western Hemispheric Trade, UTEP Hunt Institute for Global Competitiveness, and a UTEP College of Business Administration Faculty Research Grant. Helpful comments and suggestions were provided by Joanne Tokle, Scott Carson, and three anonymous referees. Econometric research assistance was provided by Garrett Castle, Alejandro Ceballos, and Alan Jiménez.

Notes

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