University of Virginia
100 Darden Blvd
Charlottesville VA 22903
Institutional Affiliation: University of Virginia
NBER Working Papers and Publications
|August 2019||Deposit Market Power, Funding Stability and Long-Term Credit|
with Lei Li, 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, Lei Li, 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, .
|September 2013||Exporting Liquidity: Branch Banking and Financial Integration|
with Erik Gilje, Philip E. Strahan: w19403
Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find that banks exposed to shale booms increase their mortgage lending in non-boom counties by 0.93% per 1% increase in deposits. This effect is present only in markets where banks have branches and is strongest for mortgages that are hard to securitize. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.
Published: "Exporting Liquidity: Branch Banking and Financial Integration," Journal of Finance, Volume 71, Issue 3, June 2016, Pages: 1159–1184.
|January 2006||Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates|
with Philip E. Strahan: w11983
This paper shows that securitization reduces the influence of bank financial condition on loan supply. Low-cost funding and increased balance-sheet liquidity raise bank willingness to approve mortgages that are hard to sell (jumbo mortgages), while having no effect on their willingness to approve mortgages easy to sell (non-jumbos). Thus, the increasing depth of the mortgage secondary market fostered by securitization has reduced the impact of local funding shocks on credit supply. By extension, securitization has weakened the link from bank funding conditions to credit supply in aggregate, thereby mitigating the real effects of monetary policy.
Published: Loutskina Elena and Philip E. Strahan. "SECURITIZATION AND THE DECLINING IMPACT OF BANK FINANCIAL CONDITION ON LOAN SUPPLY: EVIDENCE FROM MORTGAGE ORIGINATIONS." Journal of Finance 64, 2 (2009): 861-922.