The latest quarterly report released yesterday by the FDIC is consistent with consumers’ Money Anxiety showing that when consumers are less financially anxious, they increase their borrowing level and improve their payment record.  The 2013 fourth quarter FDIC report released yesterday shows that bank loans increased by $91 billion, and over 90-day due payments decreased by $14 billion amid the lowest level of money anxiety in five years.

The relatively low level of consumers’ money anxiety is prompting consumers and businesses to borrow more. According to the FDIC data, “Total loan and lease balances increased by $90.9 billion (1.2 percent), with commercial and industrial (C&I) loans rising by$27.3 billion (1.7 percent), real estate loans secured by nonfarm nonresidential properties up by $17.1 billion (1.6 percent).”   Additionally, more consumers are now paying their loan payments on time as “The amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) declined for a 15th consecutive quarter, falling by $14 billion (6.3 percent).”

The link between banks’ performance and consumers’ financial anxiety is empirically demonstrated in Money Anxiety - a new behavioral economics book that shows how consumers modify their banking habits based on their level of money anxiety.  Moreover, the strong link between consumer financial behavior and their money anxiety makes it possible for banks to project how consumers will behave with their money at various levels of economic conditions.


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