Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 430: Banking Without Branches

Niklas Amberg () and Bo Becker ()
Additional contact information
Niklas Amberg: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Bo Becker: 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

Keywords: Banks; branch closures; credit supply

JEL-codes: D22; G21; G32; R12; R32

Language: English

42 pages, February 1, 2024

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