Template-Type: ReDIF-Paper 1.0
Author-Name: Sebastian Doerr
Author-X-Name-First: Sebastian
Author-X-Name-Last: Doerr
Author-Name: Gazi Kabas
Author-X-Name-First: Gazi
Author-X-Name-Last: Kabas 
Author-Name: Steven Ongena
Author-X-Name-First: Steven
Author-X-Name-Last: Ongena
Title: Population aging and bank risk-taking
Abstract: What are the implications of an aging population for financial stability? To examine this question, we exploit geographic variation in aging across U.S. counties. We establish that banks with higher exposure to aging counties increase loan-to-income ratios, especially where they operate no branches. Laxer lending standards also lead to higher nonperforming loans during downturns, suggesting higher credit risk. Inspecting the mechanism shows that aging drives risk-taking through two contemporaneous channels: deposit in ows due to seniors' propensity to save in deposits; and depressed local investment opportunities due to seniors' lower credit demand. Banks thus look for riskier clients in no-branch counties.
Length: 53 pages
Creation-Date: 2022-11
File-URL: https://www.bis.org/publ/work1050.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1050.htm
File-Format: text/html
Number: 1050
Keywords: risk-taking, financial stability, low interest rates, population aging, demographics.
Classification-JEL: E51, G21.
Handle: RePEc:bis:biswps:1050