https://macropaperwarehouse.com/authors/george-g.-pennacchi/George G. PennacchiHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/the-effects-of-an-aging-population-on-the-structure-of-bank-assets-and-liabilities/https://macropaperwarehouse.com/papers/the-effects-of-an-aging-population-on-the-structure-of-bank-assets-and-liabilities/<p>Using 2001-2022 annual data on U.S. commercial and savings banks matched with county-level demographic data, this paper shows that banks operating in areas with older populations—measured by the deposit-weighted proportion of seniors (individuals over 65) in the counties where the bank has branches—issue more retail deposits and less wholesale funding, pay relatively lower retail deposit rates with greater stickiness across maturities, and experience smaller deposit withdrawals when market interest rates rise. On the asset side, these banks hold significantly more securities and fewer loans (particularly small business and residential mortgage loans) with longer maturities, substantially raising their asset-liability maturity gap. These findings are consistent with a lifecycle model in which seniors demand risk-free retail deposits as an investment vehicle while exhibiting lower borrowing demand, combined with the localization of banks&rsquo; deposit-taking and lending. The paper instruments for a bank&rsquo;s senior exposure using projected county-level senior population shares constructed from historical state-level fertility rates and county-level cohort change rates by race and sex, mitigating concerns about endogenous bank location relative to contemporaneous economic conditions.</p>