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Press Release

Branches provide banks with an information advantage, says Cleveland Fed researcher

With the increasing use of Internet and mobile banking, some have been predicting the end of brick-and-mortar banks. But Federal Reserve Bank of Cleveland researcher Kristle Cortés says having a physical presence provides banks with advantages that impact the bottom line. Examining mortgage lending during the financial crisis, Cortés finds that financial institutions were able to make better quality loans when they had a branch in the area, which suggests that their local presence gave them invaluable information about borrowers and conditions in the local economy.

According to Cortés, lenders with a local presence reduced their lending in overheated markets, i.e., areas where house prices were potentially above what would be acceptable based on fundamentals. Local lenders also originated fewer loans in areas where prices eventually fell, and they sold many of the loans they did originate in those areas.

“Banks behaved differently during the run-up to the financial crisis when they had a bank branch in the area where the property was located,” says Cortés. “These findings show that bank branches allow financial institutions access to better information about the local economy, which in turn allows them to make better lending decisions.”

Read The Role Bank Branches Play in a Mobile Age

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Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell,, 513.455.4479