Why is commercial lending declining in importance in the United States? What effect does this decline have on overall commercial lending activities?

Finance Dec 18, 2020

Why is commercial lending declining in importance in the United States?

What effect does this decline have on overall commercial lending activities?

Expert Solution

The commercial lending is declining its importance in the United States because there is an increase in the number of substitutes or non-banking institutes to provide loans like commercial paper that provides provide short term loans at a lower rate as compared to banks.

The decline in the commercial lending activities leads the bank with small borrowings, and hence it is riskier as it makes the monitoring and the credit estimate of the loans very difficult.

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