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Report
Liquidity Regulations, Bank Lending, and Fire-Sale Risk
We examine whether U.S. banks subject to the Liquidity Coverage Ratio (LCR) reduce lending (an unintended consequence) and/or become more resilient to liquidity shocks, as intended by regulators. We find that LCR banks tighten lending standards, and reduce liquidity creation that occurs mainly through lower lending relative to non-LCR banks. However, covered banks also contribute less to fire-sale externalities relative to exempt banks. For LCR banks, we estimate that the total after-tax benefits of reduced fire-sale risk (net of the costs associated with foregone lending) exceed $50 billion ...
Journal Article
Economic Effects of Tighter Lending by Banks
Banks tightened the criteria used to approve loans over the past year. Analysis shows that their tighter lending standards can be partially explained by economic conditions that reduce demand for loans and increase their potential risk, such as policy rate increases and a slowing economy. The unexplained part may reflect a restrained credit supply, specifically related to banks being less willing or able to take on risk. What are the potential economic consequences? Past credit supply shocks have had significant long-lasting effects on unemployment but less impact on inflation.
Journal Article
Regulations
The Federal Reserve, HUD and the Federal Trade Commission, among others, implement regulations that address many abusive lending practices.
Banking Analytics: The Growing Connection between Bank and Nonbank Sectors
U.S. banks have steadily increased lending to nondepository financial institutions, such as mortgage firms and insurers, in recent years. What is the composition of these loans to NDFIs?
Banking Analytics: Commercial Real Estate Loan Growth Slows to 11-Year Low
An analysis of call report data shows that quarterly growth in commercial real estate loan volumes at U.S. banks slowed throughout 2024.
Banking Analytics: Understanding the Composition of Bank Loan Portfolios
In the fourth quarter of 2024, commercial real estate loans represented a quarter of U.S. banks’ loan portfolios. What other types of loans did these institutions hold?
Journal Article
Private Efforts for Affordable Mortgage Lending Before Fannie and Freddie
Prior to government interventions in the U.S. mortgage market during the 1930s, private institutions arose to improve the efficiency of the market and produce more affordable mortgage products. These institutions included mortgage companies that made significant use of mortgage securitization, building and loan associations, and life insurance company mortgage operations. These developments allowed for the creation of geographically more diversified mortgage portfolios while working to address the difficulties of maintaining effective oversight of local lending agents. They may be suggestive ...
Discussion Paper
Documenting Lender Specialization
Robust banks are a cornerstone of a healthy financial system. To ensure their stability, it is desirable for banks to hold a diverse portfolio of loans originating from various borrowers and sectors so that idiosyncratic shocks to any one borrower or fluctuations in a particular sector would be unlikely to cause the entire bank to go under. With this long-held wisdom in mind, how diversified are banks in reality?
Briefing
Redlining and U.S. Residential Mortgage Market Pricing
Does redlining have implications for mortgage pricing today? This article summarizes our research assessing long-lasting implications from the "residential security maps" developed by the Home Owners Loan Corp. in the 1930s that color/letter-coded U.S. neighborhoods. The study finds (1) that the average levels of mortgage rates and fees are modestly higher for all borrowers on the historically targeted (redlined, that is, C-coded or D-coded) side of a neighborhood color boundary; (2) that mortgage rates and fees are modestly higher for minorities on either side of the boundary; (3) that these ...
Discussion Paper
How Do Liquidity Conditions Affect U.S. Bank Lending?
The recent financial crisis underscored the importance of understanding how liquidity conditions for banks (or other financial institutions) influence the banks’ lending to domestic and foreign customers. Our recent research examines the domestic and international lending responses to liquidity risks across different types of large U.S. banks before, during, and after the global financial crisis. The analysis compares large global U.S. banks—that is, those that have offices in foreign countries and are able to move liquidity from affiliates across borders—with large domestic U.S. banks, ...