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, which ...
Cross-border prudential policy spillovers: how much? How important? Evidence from the International Banking Research Network
The development of macroprudential policy tools has been one of the most significant changes in banking regulation in recent years. In this multi-study initiative of the International Banking Research Network, researchers from fifteen central banks and two international organizations use micro-banking data in conjunction with a novel data set of prudential instruments to study international spillovers of prudential policy changes and their effects on bank lending growth. The collective analysis has three main findings. First, the effects of prudential instruments sometimes spill over borders ...
How Small Banks Deal with Large Shocks
After a natural disaster such as a hurricane, tornado, or flood, banks in the affected area experience a sharp rise in the demand for loans as property owners look to repair the damage. Recent research has focused on such events to study how small community banks adjust their typical way of doing business to respond to large shocks. The research finds that banks strategically adjust their business in three ways to meet the increased demand for capital. Two adjustments increase the funds available for lending, while one shifts lending from areas unaffected by the disaster to the affected area, ...
Will Digital Wallets Replace Cash?
Dialogue with the Fed attendees hear about the opportunities and challenges involved with digital wallets like Venmo.
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 ...
Cross-Country Evidence on Transmission of Liquidity Risk through Global Banks
Over the past thirty years, the typical large bank has become a global entity with subsidiaries in many countries. In parallel, financial liberalization has increased the interconnectedness of banking systems, with domestic banking systems becoming more exposed to shocks transmitted through foreign banks. This globalization of banking propagated liquidity risk during the global financial crisis and subsequent euro area crisis. Unfortunately, little is known about how cross-border operations of global banks transmit liquidity shocks between countries. The seminal work by Peek and Rosengren ...
What Do Banks Do with All That \\"Fracking\\" Money?
Banks play a crucial role in the economy by channeling funds from savers to borrowers. The ability of banks to accomplish this intermediation has become an important element in understanding the causes and consequences of business cycles. In a recent staff report, I investigate how a positive deposit windfall translates into investments by banks. This post, the first of two, shows how the development of new energy resources has led to deposit inflows to banks and how that can be used to estimate banks? investment decisions over the recent business cycle. The second post will look at factors ...
The Fed’s Emergency Facilities: Usage, Impact, and Early Lessons
Remarks at Hudson Valley Pattern for Progress (delivered via videoconference).
The Effect of Bank Supervision on Risk Taking : Evidence from a Natural Experiment
In this paper, we exploit a natural experiment in which thrifts in several states witnessed an exogenous reduction in supervisory attention to assess the effect of supervision on financial institutions' willingness to take risk. We show that the affected institutions took on much more risk than their unaffected counterparts in other districts that were subject to identical regulations. Subsequent to the emergency enlistment of examiners and supervisors from other parts of the country two years later, additional risk taking by the affected thrifts ceased. We find that the expansion in risk ...
What Types of Customer Data Do Fintech Firms Use?
Beyond cash flow and credit scores, technology-driven lenders have also looked at social media activity and phone ownership.