The death of a regulator: strict supervision, bank lending, and business activity
- An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage loans. Estimating such effects is challenging. We exploit the extinction of the thrift regulator (OTS) to analyze economic links between strict supervision, bank lending and business activity. We first show that the OTS replacement indeed resulted in stricter supervision of former OTS banks. Next, we analyze the ensuing lending effects. We show that former OTS banks increase small business lending by roughly 10 percent. This increase is concentrated in well-capitalized banks, those more affected by the new regime, and cannot be fully explained by a reallocation from mortgage to small business lending after the crisis. These findings suggest that stricter supervision operates not only through capital but can also correct deficiencies in bank management and lending practices, leading to more lending and a reallocation of loans.
Verfasserangaben: | João Granja, Christian LeuzORCiDGND |
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URN: | urn:nbn:de:hebis:30:3-616442 |
DOI: | https://doi.org/10.2139/ssrn.3092284 |
Titel des übergeordneten Werkes (Englisch): | LawFin working paper ; No. 4 |
Schriftenreihe (Bandnummer): | LawFin Working Paper (4) |
Verlag: | Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University |
Verlagsort: | Frankfurt am Main |
Dokumentart: | Arbeitspapier |
Sprache: | Englisch |
Jahr der Fertigstellung: | 2020 |
Jahr der Erstveröffentlichung: | 2020 |
Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Datum der Freischaltung: | 09.09.2021 |
Freies Schlagwort / Tag: | Aggregate outcomes; Bank regulation; Business lending; Enforcement; Entry and exit; Loan losses; Prudential oversight |
Ausgabe / Heft: | July 2020 |
Seitenzahl: | 76 |
Letzte Seite: | 74 |
Institute: | Rechtswissenschaft / Rechtswissenschaft |
Wirtschaftswissenschaften / Wirtschaftswissenschaften | |
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
Wissenschaftliche Zentren und koordinierte Programme / DFG-Forschergruppen / Foundation of Law and Finance | |
DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
3 Sozialwissenschaften / 34 Recht / 340 Recht | |
Sammlungen: | Universitätspublikationen |
Lizenz (Deutsch): | Deutsches Urheberrecht |