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Report
Bond market discipline of banks: is the market tough enough?
Morgan, Donald P.; Stiroh, Kevin J. (1999-12-01)
As the banking business grows more complex, government supervisors of banks seem increasingly willing to share the role of policing bank risk with private investors, especially bondholders. This paper investigates the disciplinary role of markets using bond spreads, ratings, and bank portfolio data on over 4,100 new bonds issued between 1993 and 1998, including almost 600 bond issues by banks and bank holding companies. We find that the bond spread/rating relationship is the same for the bank issues as for nonbank issues, especially among the investment grade issues. This suggests that the ...
Staff Reports , Paper 95

Working Paper
Mapping Heat in the U.S. Financial System
Palumbo, Michael G.; Lee, Seung Jung; Warusawitharana, Missaka; Aikman, David; Kiley, Michael T. (2015-06-24)
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 ...
Finance and Economics Discussion Series , Paper 2015-59

Working Paper
Do Small Businesses Still Prefer Community Banks?
Goulding, William; Rice, Tara N.; Berger, Allen N. (2013-12-01)
We formulate and test hypotheses about the role of bank type ? small versus large, single-market versus multimarket, and local versus nonlocal banks ? in banking relationships. The conventional paradigm suggests that "community banks" ? small, single market, local institutions ? are better able to form strong relationships with informationally opaque small businesses, while "megabanks" ? large, multimarket, nonlocal institutions ? tend to serve more transparent firms. Using the 2003 Survey of Small Business Finance (SSBF), we conduct two sets of tests. First, we test for the type of bank ...
International Finance Discussion Papers , Paper 1096

Journal Article
The 2006 HMDA data
Brevoort, Kenneth P.; Canner, Glenn B.; Avery, Robert B. (2007-09)
Analyzes the 2006 data collected under the Home Mortgage Disclosure Act (HMDA). The review focuses primarily on the pricing information in the data. Includes an assessment of factors that account for the variation in rates of serious delinquency on mortgage loans across U.S. metropolitan area counties observed as of March 31, 2007, with information drawn from the HMDA data on the incidence of higher-priced lending and from credit scores by geographic area.
Federal Reserve Bulletin , Volume 93 , Issue Sep , Pages A73-A109

Working Paper
Benchmarking Operational Risk Stress Testing Models
Stewart, Rob T.; Curti, Filippo; Migueis, Marco (2019-05-28)
The Federal Reserve?s Comprehensive Capital Analysis and Review (CCAR) requires large bank holding companies (BHCs) to project losses under stress scenarios. In this paper, we propose multiple benchmarks for operational loss projections and document the industry distribution relative to these benchmarks. The proposed benchmarks link BHCs? loss projections with both financial characteristics and metrics of historical loss experience. These benchmarks capture different measures of exposure and together provide a comprehensive view of the reasonability of model outcomes. Furthermore, we employ ...
Finance and Economics Discussion Series , Paper 2019-038

Report
The Theory of Financial Stability Meets Reality
Boyarchenko, Nina; Hachem, Kinda; Kleymenova, Anya V. (2025-06-01)
A large literature at the intersection of economics and finance offers prescriptions for regulating banks to increase financial stability. This literature abstracts from the discretion that accounting standards give banks over financial reporting, creating a gap between the information assumed to be available to regulators in models of optimal regulation and the information available to regulators in reality. We bridge insights from the economics, finance, and accounting literatures to synthesize knowledge about the design and implementation of bank regulation and identify areas where more ...
Staff Reports , Paper 1155

Working Paper
Did Doubling Reserve Requirements Cause the 1937-38 Recession? New Evidence on the Impact of Reserve Requirements on Bank Reserve Demand and Lending
Wheelock, David C.; Mason, Joseph R.; Calomiris, Charles W. (2022-05-04)
In 1936-37, the Federal Reserve doubled member banks' reserve requirements. Friedman and Schwartz (1963) famously argued that the doubling increased reserve demand and forced the money supply to contract, which they argued caused the recession of 1937-38. Using a new database on individual banks, we show that higher reserve requirements did not generally increase banks' reserve demand or contract lending because reserve requirements were not binding for most banks. Aggregate effects on credit supply from reserve requirement increases were therefore economically small and statistically zero.
Working Papers , Paper 2022-011

Journal Article
GSE guarantees, financial stability, and home equity accumulation
Passmore, Wayne; von Hafften, Alexander H. (2018-24-03)
Before 2008, the government?s ?implicit guarantee? of the securities issued by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac led to practices by these institutions that threatened financial stability. In 2008, the Federal Housing Finance Agency placed these GSEs into conservatorship. Conservatorship was intended to be temporary but has now reached its tenth year, and policymakers continue to weigh options for reform. In this article, the authors assess both implicit and explicit government guarantees for the GSEs. They argue that adopting a legislatively defined ...
Economic Policy Review , Issue 24-3 , Pages 11-27

Working Paper
Unexpected Effects of Bank Bailouts: Depositors Need Not Apply and Need Not Run
Schoors, Koen; Lamers, Martien; Berger, Allen N.; Roman, Raluca (2020-03-05)
A key policy issue is whether bank bailouts weaken or strengthen market discipline. We address this by analyzing how bank bailouts influence deposit quantities and prices of recipients versus other banks. Using the Troubled Asset Relief Program (TARP) bailouts, we find both deposit quantities and prices decline, consistent with substantially reduced demand for deposits by bailed-out banks that dominate market discipline supply effects. Main findings are robust to numerous checks and endogeneity tests. However, diving deeper into depositor heterogeneity suggests nuances. Increases in uninsured ...
Working Papers , Paper 21-10

Working Paper
The Credit Card Act and Consumer Debt Structure
Ronen, Joshua; Jagtiani, Julapa; Dou, Yiwei; Maingi, Ramain Quinn (2020-08-05)
We investigate whether the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 influenced the debt structure of consumers. By debt structure, we mean the proportion of total available credit from credit cards for each consumer.The act enhances disclosures of contractual and related information and restricts card issuers’ ability to raise interest rates or charge late or over-limit fees, primarily affecting non-prime borrowers. Using the credit history via the Federal Reserve Bank of New York/Equifax Consumer Credit Panel during 2006–2016, we find that the average ...
Working Papers , Paper 20-32

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