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Banking Deserts, Branch Closings, and Soft Information
U.S. banks have shuttered nearly 5,000 branches since the financial crisis, raising concerns that more low-income and minority neighborhoods may be devolving into ?banking deserts? with inadequate, or no, mainstream financial services. We investigate this issue and also ask whether such neighborhoods are particularly exposed to branch closings?a development that, according to recent research, could reduce credit access, even with other branches present, by destroying ?soft? information about borrowers that influences lenders? credit decisions. Our findings are mixed, suggesting that further study of these concerns is warranted.
AUTHORS: Pinkovskiy, Maxim L.; Morgan, Donald P.; Bryan Yang
Fear of $10 Billion
Ten billion has become a big number in banking since the Dodd-Frank Act of 2010. When banks? assets exceed that threshold, they face considerably heightened supervision and regulation, including exams by the Consumer Financial Protection Bureau, caps on interchange fees, and annual stress tests. There are plenty of anecdotes about banks avoiding the $10 billion threshold or waiting to cross with a big merger, but we?ve seen no systematic evidence of this avoidance behavior. We provide some supporting evidence below and then discuss the implications for size-based bank regulation?where compliance costs ratchet up with size?more generally.
AUTHORS: Bryan Yang; Morgan, Donald P.