Federal Reserve Board of Governors
Washington, DC, DC
Institutional Affiliation: Federal Reserve Board
NBER Working Papers and Publications
|August 2019||Deposit Market Power, Funding Stability and Long-Term Credit|
with Elena Loutskina, Philip E. Strahan: w26163
This paper shows that banks raising deposits in more concentrated markets have more funding stability, which enhances banks’ ability to extend longer-maturity loans. We show that banks raising deposits in concentrated markets exhibit less pro-cyclical financing costs and profits, which in turn reduces the funding risk of originating long-term illiquid loans. Consistently, banks with deposit HHI one standard deviation above average extend loans with about 20% longer maturity than those with deposit HHI one standard deviation below average. Deposit concentration also allows banks to charge lower maturity premiums. Access to banks raising funds in concentrated markets improves growth in industries traditionally reliant on long-term credit.
|March 2018||Stress Tests and Small Business Lending|
with Kristle Cortés, Yuliya Demyanyk, Elena Loutskina, Philip E. Strahan: w24365
Post-crisis stress tests have altered banks’ credit supply to small business. Banks affected by stress tests reduce credit supply and raise interest rates on small business loans. Banks price the implied increase in capital requirements from stress tests where they have local knowledge, and exit markets where they do not, as quantities fall most in markets where stress-tested banks do not own branches near borrowers, and prices rise mainly where they do. These reductions in supply are concentrated among risky borrowers. Stress tests do not, however, reduce aggregate credit. Small banks increase their share in geographies formerly reliant on stress-tested lenders.
Published: Kristle R. Cortés & Yuliya Demyanyk & Lei Li & Elena Loutskina & Philip E. Strahan, 2019. "Stress Tests and Small Business Lending," Journal of Financial Economics, .