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Working Paper
Prudential Policies and Their Impact on Credit in the United States
We analyze how two types of recently used prudential policies affected the supply of credit in the United States. First, we test whether the U.S. bank stress tests had any impact on the supply of mortgage credit. We find that the first Comprehensive Capital Analysis and Review (CCAR) stress test in 2011 had a negative effect on the share of jumbo mortgage originations and approval rates at stress-tested banks?banks with worse capital positions were impacted more negatively. Second, we analyze the impact of the 2013 Supervisory Guidance on Leveraged Lending and subsequent 2014 FAQ notice, ...
Working Paper
Estimating changes in supervisory standards and their economic effects
The disappointingly slow recovery in the U.S. from the recent recession and financial crisis has once again focused attention on the relationship between financial frictions and economic growth. With bank loans having only recently started growing and still sluggish, some bankers and borrowers have suggested that unnecessarily tight supervisory policies have been a constraint on new lending that is hindering recovery. This paper explores one specific aspect of supervisory policy: whether the standards used to assign commercial bank CAMELS ratings have changed materially over time (1991-2011). ...
Working Paper
The U.S. Syndicated Loan Market : Matching Data
We introduce a new software package for determining linkages between datasets without common identifiers. We apply these methods to three datasets commonly used in academic research on syndicated lending: Refinitiv LPC DealScan, the Shared National Credit Database, and S&P Global Market Intelligence Compustat. We benchmark the results of our match using results from the literature and previously matched files that are publicly available. We find that the company level matching is enhanced by careful cleaning of the data and considering hierarchical relationships. For loan level matching, a ...
Working Paper
Identifying Financial Crises Using Machine Learning on Textual Data
We use machine learning techniques on textual data to identify financial crises. The onset of a crisis and its duration have implications for real economic activity, and as such can be valuable inputs into macroprudential, monetary, and fiscal policy. The academic literature and the policy realm rely mostly on expert judgment to determine crises, often with a lag. Consequently, crisis durations and the buildup phases of vulnerabilities are usually determined only with the benefit of hindsight. Although we can identify and forecast a portion of crises worldwide to various degrees with ...
Working Paper
Sentiment in Bank Examination Reports and Bank Outcomes
We investigate whether the bank examination process provides useful insight into bank future outcomes. We do this by conducting textual analysis on about 5,500 small to medium-sized commercial bank examination reports from 2004 to 2016. These confidential examination reports provide textual context to the components of supervisory ratings: capital adequacy, asset quality, management, earnings, and liquidity. Each component is given a categorical rating, and each bank is assigned an overall composite rating, which are used to determine the safety and soundness of banks. We find that, ...
Working Paper
The Well-Being of Nations: Estimating Welfare from International Migration
The limitations of GDP as a measure of welfare are well known. We propose a new method of estimating the well-being of nations. Using gross bilateral international migration flows and a discrete choice model in which everyone in the world chooses a country in which to live, we estimate each country?s overall quality of life. Our estimates, by relying on revealed preference, complement previous estimates of economic well-being that consider only income or a small number of factors, or rely on structural assumptions about how these factors contribute to wellbeing.
Working Paper
Less Bank Regulation, More Non-Bank Lending
Bank deregulation in the form of the repeal of the Glass-Steagall Act facilitated the entry of non-bank lenders into the market for syndicated loans during the pre-2008 credit boom. Institutional investors disproportionately purchase tranches of loans originated by universal banks able to cross-sell loans and underwriting services to firms (as permitted by the repeal). A shock to cross-selling intensity increases loan liquidity at origination and over time. The mechanism is that non-loan exposures ensure monitoring even when banks retain small loan shares. Our findings complement the ...
Journal Article
Profits and balance sheet developments at U.S. commercial banks in 2009
Reviews recent developments in the balance sheets and in the profitability of U.S. commercial banks. The article discusses how developments in the U.S. banking industry in 2009 and early 2010 were related to changes in financial markets and in the broader economy.
Working Paper
Mapping Heat in the U.S. Financial System
We provide a framework for assessing the build-up of vulnerabilities in the U.S. financial system. We collect forty-four indicators of financial and balance-sheet conditions, cutting across measures of valuation pressures, nonfinancial borrowing, and financial-sector health. We place the data in economic categories, track their evolution, and develop an algorithmic approach to monitoring vulnerabilities that can complement the more judgmental approach of most official-sector organizations. Our approach picks up rising imbalances in the U.S. financial system through the mid-2000s, presaging ...