Search Results
Discussion Paper
Are Stress Tests Still Informative?
Since the height of the financial crisis, each year the Federal Reserve has disclosed the results of its stress tests, and stress testing has become ?business as usual? in the U.S. banking industry. In this post, we assess whether market participants find supervisory stress test disclosures informative. After half a decade, do the disclosures still contain information that the market finds valuable?
Working Paper
Claim Dilution in the Municipal Debt Market
Using loan-level municipal bank lending data, we examine the debt structure of municipalities and its response to exogenous income shocks. We show that small, more indebted, low-income, and medium credit quality counties are particularly reliant on private bank financing. Low income counties are more likely to increase bank debt share after an adverse permanent income shock while high income counties do not shift their debt structure in response. In contrast, only high income counties draw on their credit lines after adverse transitory income shocks. Overall, our paper raises concerns about ...
Working Paper
Social Externalities of Bank Enforcement Actions: The Case of Minority Lending
This paper studies the role banking supervision plays in improving access to credit for minorities by investigating how enforcement decisions and orders (EDOs) affect the bank borrower base. We find that, after an EDO's termination, banks significantly increase residential mortgage lending to minorities, even when the enforcement order is not issued for violations of fair lending laws. Our findings suggest that improvements in banks' internal credit assessment and compliance due to the enforcement process are associated with the expansion in lending to minority borrowers. Our findings ...
Discussion Paper
Consumer financial protection regulations: how do they measure up?
The Payment Cards Center's September 2012 policy conference advanced the discussion of targeted design and outcome measurement as central features of public policy in the area of consumer financial protections. Speakers considered regulations addressing the disclosure of credit terms; standards for assessing the unfairness, deceptiveness, and abusiveness of lending acts or practices; the management of revolving credit accounts; and the challenges of analyzing consumer complaints in the context of consumer financial protections. The concluding panel discussed unanswered questions and research ...
Working Paper
Observing Enforcement: Evidence from Banking
This paper finds that the disclosure of supervisory actions is associated with changes in regulators' enforcement behavior. Using a novel sample of enforcement decisions and orders (EDOs) and the setting of the 1989 Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which required the public disclosure of EDOs, we find that U.S. bank regulators issue more EDOs, intervene sooner, and rely more on publicly observable signals after the disclosure regime change. The content of EDOs also changes, with documents becoming more complex and boilerplate. Our results are stronger in ...
Working Paper
Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations
We examine the effects of a 2012 regulatory reform that mandated fee and performance disclosures for the investment options in 401(k) plans. We show that participants became significantly more attentive to expense ratios and short-term performance after the reform. The disclosure effects are stronger among plans with large average contributions per participant and weaker for plans with many investment options. Additionally, these results are not driven by secular changes in investor behavior or sponsor-initiated changes to the investment menus. Our findings suggest that providing salient fee ...
Report
Public disclosure and risk-adjusted performance at bank holding companies
This paper examines the relationship between the amount of information disclosed by bank holding companies (BHCs) and their subsequent risk-adjusted performance. Using data from the annual reports of BHCs with large trading operations, we construct an index of publicly disclosed information about the BHCs? forward-looking estimates of market risk exposure in their trading and market-making activities. The paper then examines the relationship between this index and subsequent risk-adjusted returns in the BHCs? trading activities and for the firm overall. The key finding is that more disclosure ...
Journal Article
Public disclosure and risk-adjusted performance at bank holding companies
This article examines the relationship between the amount of information disclosed by bank holding companies (BHCs) and the BHCs? subsequent risk-adjusted performance. Using data from the annual reports of BHCs with large trading operations, the author constructs an index that quantifies the BHCs? public disclosure of forward-looking estimates of market risk exposure in their trading and market-making activities. She then examines the relationship between this index and subsequent risk-adjusted returns in the BHCs? trading activities and for the firm overall. The key finding is that more ...
Working Paper
Disclosure of stress test results
Should regulatory bank examinations be made public? Regulators have argued that the confidentiality of the examination process promotes frank exchanges between bankers and examiners and that public disclosure of examination results could have a chilling effect. I examine the tradeoffs in a world in which examination results can be kept confidential, but regulatory interventions are observable by market participants, as they typically are for stress tests. Inducing banks to communicate truthfully requires regulators to engage in forbearance, which is priced into banks? uninsured debt and ...
Journal Article
Should regulators reveal information about banks?
Regulators collect and produce information about banks. This information helps regulators monitor the safety and soundness of the banking system, and it also helps policymakers preserve financial stability. A key issue is whether this information should be made public and, if so, to what extent. In this article, we will explore some of the tradeoffs involved.