Banks’ Reaction to Credit Unions: Evidence from a High-Interest Credit Market

摘要: What happens to personal credit interest rates banks charge when a credit union operates in a location? We gather a unique dataset from the Brazilian Central Bank containing 370,383 location-month observations from 6,225 distinct locations and estimate dynamic panels of determinants of bank credit operations’ average annual percentage rate (APR). Results indicate that when a credit union (CU) operates in a location, bank APRs are between 4.3 pp and 25.6 pp lower, while CU market power seems to drive up bank loan rates. We provide evidence that Central Banks must consider both concentration and competition when designing policies.