The impact of credit union competition on Bank loan rates, 2010–2019

Abstract Although credit unions have steadily increased their role in the U.S. economy over the past 20 years, few studies have attempted to quantify their impact on bank consumer loan rates, particularly in an era of low and stable interest rates. Using a sample of quarterly auto loan and mortgage bank rates in U.S. metropolitan statistical areas (MSAs) between 2010 and 2019, we study the degree to which increasing competition from credit unions can discipline bank loan rates, even in the face of decreasing competition within the banking sector. We find strong statistical evidence that MSA‐level bank loan rates fall as the share of deposits held by credit unions increases, particularly in the larger markets. The results suggest that regulators should consider the role of credit unions, along with other financial institutions, in the local market when evaluating the nature of competition in consumer loans.