Demographic Banking: The Impact of Demographic Change on the Financial Constraints of Borrowers at Bavarian Savings Banks

Abstract

The theory and empirical research of discrimination and credit rationing indicates that certain socio-demographic borrower groups are more likely to be financially constrained than others. In Germany, especially in the mortgage market, empirical evidence for this issue is scarce because of missing data. This study aims to address this issue. Financial data to be used in the study will be taken from an internal banking database, which covers all 71 Bavarian savings banks. This dataset contains information concerning customer specifics including socio-demographic characteristics as well as contract specifics. The focus of this study is on mortgage loans granted by Bavarian savings banks in 2013. The data set consists of about 50,000 customer records. A structural equation model is used to identify the causes of credit constraints in the German mortgage market. This is the first study of credit constraints in the mortgage market in Germany focusing on those socio-demographic borrower specifics that are most relevant within the context of the well documented demographic trends in Germany towards an older, increasingly female and more ethnically diverse population.