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Keywords:Banking 

Discussion Paper
China’s Continuing Credit Boom

Debt in China has increased dramatically in recent years, accounting for roughly one-half of all new credit created globally since 2005. The country’s share of total global credit is nearly 25 percent, up from 5 percent ten years ago. By some measures (as documented below), China’s credit boom has reached the point where countries typically encounter financial stress, which could spill over to international markets given the size of the Chinese economy. To better understand the associated risks, it is important to examine the drivers of China’s expansion in credit, the increasing ...
Liberty Street Economics , Paper 20170227

Journal Article
Banking Trends: The Growing Role of CRE Lending

Commercial real estate has grown dramatically as a share of U.S. economic activity and is banks? largest lending category, particularly for small and midsize banks. It is also the riskiest part of bank portfolios. James DiSalvo and Ryan Johnston provide a primer. First in a series.
Banking Trends , Issue Q3 , Pages 15-21

Report
Government Guarantees and the Valuation of American Banks

Banks' ratio of the market value to book value of their equity was close to 1 until the 1990s, then more than doubled during the 1996-2007 period, and fell again to values close to 1 after the 2008 financial crisis. Sarin and Summers (2016) and Chousakos and Gorton (2017) argue that the drop in banks' market-to-book ratio since the crisis is due to a loss in bank franchise value or profitability. In this paper we argue that banks' market-to-book ratio is the sum of two components: franchise value and the value of government guarantees. We empirically decompose the ratio between these two ...
Staff Report , Paper 567

Working Paper
The Effect of Banks' Financial Position on Credit Growth : Evidence from OECD Countries

This paper presents empirical evidence on the effect of banks' financial position on credit growth using a sample of 29 OECD countries. The failure of the exogeneity assumption of explanatory variables is addressed using dynamic panel type instruments. The empirical results show that among capital, profits and liquidity at the end of the previous year, capital is the most important predictor of credit growth in the current year. The relationship between capital and credit growth is non-linear. Point estimates from the preferred econometric specification imply that at the sample mean a one ...
Finance and Economics Discussion Series , Paper 2016-101

Working Paper
Optimal Monetary Policy under Negative Interest Rate

In responding to the extremely weak global economy after the financial crisis in 2008, many industrial nations have been considering or have already implemented negative nominal interest rate policy. This situation raises two important questions for monetary theories: (i) Given the widely held doctrine of the zero lower bound on nominal interest rate, how is a negative interest rate (NIR) policy possible? (ii) Will NIR be effective in stimulating aggregate demand? (iii) Are there any new theoretical issues emerging under NIR policies? This article builds a model to show that (i) money ...
Working Papers , Paper 2017-19

Discussion Paper
Selection in Banking

Over the past thirty years, more than 2,900 U.S. banks have transformed from pure depository institutions into conglomerates involved in a broad range of business activities. What type of banks choose to become conglomerate organizations? In this post, we document that, from 1986 to 2018, such institutions had, on average, a higher return on equity in the three years prior to their decision to expand, as well as a lower level of risk overall. However, this superior pre-expansion performance diminishes over time, and all but disappears by the end of the 1990s.
Liberty Street Economics , Paper 20191216

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 ...
Finance and Economics Discussion Series , Paper 2022-036

Renewable Energy Projects Present Unique Lender Risks, Need for Oversight

A vigorous risk management program can mitigate potential problems facing banks and nonbank financial institutions engaged in financing these facilities—whether as agents, loan participants or direct lenders.
Dallas Fed Economics

Journal Article
Shadow banking and the crisis of 2007-08

In recent decades, institutions that function much like traditional banks have grown outside regulatory oversight. Yet, as Daniel Sanches explains, these so-called shadow banks are as vulnerable to runs as regular banks. Because banking crises can inflict lasting economic harm, economists are interested in tracing how the panic ensued in the shadow system.
Business Review , Issue Q2 , Pages 7-14

Private Subprime Mortgages Challenged FHA During 2000s Housing Boom

Considerable research has been devoted to better understanding the meteoric rise of the PLS subprime mortgage market in the early-to-mid 2000s. But an important aspect has been largely ignored: The simultaneous decline in mortgage originations with Federal Housing Administration (FHA) insurance.
Dallas Fed Economics

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