COMMERCIAL BANKS' RESPONSE TO COSTLY DEPOSITS IN A DEREGULATED ENVIRONMENT
Eustacius N. BETUBIZA
David J. LEATHAM
The study examines balance sheet changes at Texas commercial banks following the 1980 bank deregulation. A comparison of selected deposit and asset variables for 1978 (pre-deregulation) and 1987 (post- deregulation) reveals a rapid increase in costly deposits and a decline in the proportion of loans in general, and agricultural loans in particular, relative to total bank assets. Although a weak Texas economy during this time period contributed to the observed asset reallocation, banks were also responding to the increased deposit costs and interest rate volatility following deregulation. This conclusion is consistent with previous findings cited in the study.
Commercial banks, Agricultural loans, Bank deregulation
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