Deposit market power, funding stability and long-term credit

By increasing funding stability, deposit market power reduces banks’ risk over the cycle and provides flexibility to originate long-term loans. Banks with HHI one standard deviation above average extend loans about 20% longer maturity than those below average. Deposit also allows banks charge lower premiums. The effects persist in sample of zero-duration, floating rate This has real effects: access raising funds less competitive markets improves growth bank-dependent borrowers needing finance. power, by stabilizing bank costs, helps alleviate credit cycles.