Bank Lending in the Euro Area: The Role of Bank-Firm Switching and Market Concentration

This paper investigates how euro area firms switching between banks can improve the terms at which they can borrow, using granular data on more than seven million new loans to non-financial corporations from January 2021 to June 2025. Borrowers that switch banks receive significantly lower interest rates, larger amounts and longer maturities on their new loans than comparable firms who are existing customers at the new bank. In addition, the size of the initial rate discount varies across countries and is positively correlated with loan-market concentration at the regional level. In more concentrated markets, banks grant larger discounts, but fewer firms switch banks. However, the magnitude and duration of these benefits are limited. After switching, if the firm contracts further loans from the new bank, then the interest rate, loan amount and maturity all move closer to those the bank sets for non-switching borrowers with comparable characteristics. Although this result is validated for the euro area as a whole, the results at country level are more heterogeneous.
JEL Codes: E43, G21, G31, L14
Keywords: Bank-firm relationships, Credit conditions, Loan market concentration, Euro Area, AnaCredit.