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Report
Design of contingent capital with a stock price trigger for mandatory conversion
Wang, Zhenyu; Sundaresan, Suresh (2010-05-01)
Contingent capital (CC), a regulatory debt that must convert into common equity when a bank?s equity value falls below a specified threshold (a trigger), does not in general lead to a unique equilibrium in the prices of the bank?s equity and CC. Multiplicity or absence of equilibrium arises because economic agents are not allowed to choose a conversion policy in their best interests. The lack of unique equilibrium introduces the potential for price manipulation, market uncertainty, inefficient capital allocation, and unreliability of conversion. Because CC may not convert to equity in a ...
Staff Reports , Paper 448

Journal Article
Is the Era of Overdraft Fees Over?
Neely, Michelle Clark (2023-03-08)
Some U.S. banks are cutting back overdraft fees and offering lower-cost alternatives in response to pressure from consumers, competitors and regulators.
The Regional Economist

Consumer compliance remains a multipronged effort
Shoniregun, Wendy (2026-09-04)
As banks embrace a financial landscape evolving with technological advancements, regulatory changes and shifting consumer expectations, they need strong consumer compliance programs to mitigate regulatory and legal risk while maintaining consumers' trust.
Dallas Fed Banking

Working Paper
Government Litigation Risk and the Decline in Low-Income Mortgage Lending
Frame, W. Scott; Gerardi, Kristopher; Mayer, Erik J.; Xu, Billy; Zhao, Lawrence (2024-07-15)
We study the effect of Department of Justice lawsuits in the 2010s against large lenders for alleged fraud in the Federal Housing Administration (FHA) mortgage insurance program. The suits led to more than $5 billion in settlements and caused targeted banks and their peers to precipitously exit the FHA market. Difference-in-differences and triple differences tests exploiting geographic variation in exposure to exiting banks show a 20 percent reduction in FHA lending in heavily exposed areas. This reduction was not associated with improved underwriting standards or lower default rates. Large ...
FRB Atlanta Working Paper , Paper 2024-6

Journal Article
“Stress Testing” Banks on Commercial Real Estate
Jordan-Wood, Samuel; Faria-e-Castro, Miguel (2023-12-18)
Recent research tests the effects of a large (hypothetical) drop in commercial real estate prices: Banks most affected would be small and the resulting noncompliance would apply to a small fraction of assets in the US banking system.
Economic Synopses , Issue 26 , Pages 3 pages

Journal Article
Do big banks have lower operating costs?
Zhou, Lily; Kovner, Anna; Vickery, James (2014-12)
This study examines the relationship between bank holding company (BHC) size and components of noninterest expense (NIE) in order to shed light on the sources of scale economies in banking. Drawing on detailed expense information provided by U.S. banking firms in the memoranda of their regulatory filings, the authors find a robust negative relationship between size and normalized measures of NIE. The relationship is strongest for employee compensation expenses and components of ?other? noninterest expense such as information technology and corporate overhead expenses. In addition, the authors ...
Economic Policy Review , Issue Dec , Pages 1-27

Discussion Paper
Can I Speak to Your Supervisor? The Importance of Bank Supervision
Hirtle, Beverly; Kovner, Anna (2024-04-15)
In March of 2023, the U.S. banking industry experienced a period of significant turmoil involving runs on several banks and heightened concerns about contagion. While many factors contributed to these events—including poor risk management, lapses in firm governance, outsized exposures to interest rate risk, and unrecognized vulnerabilities from interconnected depositor bases, the role of bank supervisors came under particular scrutiny. Questions were raised about why supervisors did not intervene more forcefully before problems arose. In response, supervisory agencies, including the Federal ...
Liberty Street Economics , Paper 20240415

Monetary policy implementation and the consolidated government balance sheet
Schulhofer-Wohl, Sam (2025-04-15)
This essay examines the trade-offs between different monetary policy implementation methods through the lens of the consolidated government balance sheet and income statement.
Dallas Fed Economics

Report
LIBOR: origins, economics, crisis, scandal, and reform
Hou, David; Skeie, David R. (2014-03-01)
The London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable-rate mortgage and student loans. LIBOR's volatile behavior during the financial crisis provoked questions surrounding its credibility. Ongoing regulatory investigations have uncovered misconduct by a number of financial institutions. Policymakers across the globe now face the task of reforming LIBOR in the aftermath of the scandal and ...
Staff Reports , Paper 667

Evolving leveraged loan covenants may pose novel transmission risk
Ozdagli, Ali; Ivashina, Victoria; Bräuning, Falk; Owen, Jackson (2024-08-20)
An evolving change affecting the expanding, highly leveraged corporate loan sector may impact how the economy responds to adverse shocks.
Dallas Fed Economics

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