Bigger bank lending

February 01, 2016

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When US lottery jackpot winners of Powerball and Mega Millions deposit their winnings, those banks experience a large increase in deposits and total lending, according to a study by Carlos Parra at the University of Texas. The jackpot winners’ deposits lead to a significant increase in bank deposits (4.05pc yearly change) and an increase in small business lending in the area (4.28pc yearly change). Because their deposits lead to greater total lending to small businesses but not an increase in the probability of a business receiving lending, one interpretation of the findings is that on average the increase in lending is to current clients and not new clients, the author writes.

(Source: University of Texas)

Published in Dawn, Business & Finance weekly, February 1st, 2016