Selected Outside Research
In Stablecoins We Trust?
Stablecoins’ market value has grown rapidly, and their interaction with traditional trading and payments activity has been rising as well. This article provides a comprehensive overview of stablecoins; their benefits, costs, and risks; and the policy and regulatory issues they give rise to. It delves into their trading and payments use cases, the potential for systemic spillovers, and regulatory debates over whether stablecoin issuers should face bank-style oversight. The discussion highlights vulnerabilities of stablecoins that can trigger bank-like runs—illustrated by episodes where both Tether and USDC de-pegged from their fixed exchange rate in 2022 and 2023, respectively. While proponents argue stablecoins could improve payments efficiency and financial inclusion, critics warn about herd dynamics, collateral quality and opacity. The discussion emphasizes that, given the expanding scale of stablecoin activity and its linkages to Treasuries and money markets, policy design should balance innovation with safeguards against runs and contagion.
Indirect Credit Supply: How Bank Lending to Private Credit Shapes Monetary Policy Transmission
The rise of nonbank lenders, including private credit, may affect monetary policy transmission by disrupting the direct relationship between banks and borrowing firms. This paper examines how bank funding of private-credit intermediaries alters the transmission of monetary policy, focusing on bank lending to Business Development Companies (BDCs)—a segment of the private credit market that lends mostly to large and middle-market firms. The analysis, using supervisory data, demonstrates that during monetary tightening, banks increased lending to BDCs while charging them higher rates. BDCs in turn increased credit to portfolio firms while passing on the higher rates to borrowers. Thus, this “indirect credit” supports firm investment when direct bank credit and bond markets soften, though it also amplifies the cost of capital via higher rates. The results highlight both stabilizing and cost-raising aspects of indirect intermediation.
Indirect Credit Supply: How Bank Lending to Private Credit Shapes Monetary Policy Transmission
When Margins Call: Liquidity Preparedness of Non-Bank Financial Institutions
This study develops a set of indicators and analytical tools to assess the liquidity preparedness of non-bank financial institutions (NBFIs) to margin calls from counterparties and associated network effects driving systemic risk. This framework is then applied to euro area NBFIs during the March 2020 market turmoil and the 2022–23 monetary tightening. The analysis finds an increase in liquidity‑distressed entities during these episodes, which exhibited a comparatively high frequency and severity of distressed asset sales. What gets sold varies episodically—equities dominated in 2020; government bonds more often appeared among top sales during the monetary tightening—signaling context‑dependent pressures and behaviors. The study emphasizes the toolkit as complementary to system‑wide stress tests, whereby preparedness for margin‑driven liquidity needs can mitigate the risk of procyclical fire sales and systemic spillover effects.
When margins call: liquidity preparedness of non-bank financial institutions
Should We Mind the Gap? An Assessment of the Benefits of Equity Markets and Policy Implications for Europe’s Capital Markets Union
Compared to the U.S., EU firms have relatively high dependence on bank lending relative to equity financing. This paper documents the bank dependence of EU firms and argues that this “listing gap” is a weakness that EU policymakers should prioritize reducing. In support of this view, the paper presents an empirical analysis demonstrating that after listing, companies see higher profitability, employment, innovation capacity and productivity. In addition, the discussion emphasizes that well-developed equity markets diversify funding away from the banking system, foster private risk-sharing across EU countries and help mobilize risk capital for the green and digital transitions. The paper also highlights underdeveloped pre-listing markets in Europe and argues that a stronger venture-capital ecosystem would support a larger domestic pool of listable firms.
Should we mind the gap? An assessment of the benefits of equity markets and policy implications for Europe’s capital markets union
Community Engagement: How Banks Gain an Analog Advantage in the FinTech Age
This study constructs a news-based measure of community engagement—covering sponsorships, development programs and employee volunteer work—and links it to lending outcomes and deposit stability at community banks. The study finds that, while only a minority of banks are “engaged,” those that are originate a larger volume of small-business and mortgage loans, with effects concentrated in lower-income areas. Localities with a larger share of engaged community banks recover faster from natural disasters. During the banking crisis following the collapse of SVB, engaged banks exhibited faster deposit growth, less deposit volatility and reduced likelihood of large withdrawals. The findings suggest that community engagement can help community banks strengthen their lending and deposit relationships and maintain a competitive edge.
Community Engagement: How Banks Gain an Analog Advantage in the FinTech Age
The Impact of Bank Examiners on Bank Risk Taking and Growth
Leveraging composite ratings from Federal Reserve supervisory examinations (composite RFI ratings) combined with Y-9C regulatory reporting data, this study explores how heterogeneity in examination approach affects bank outcomes. The analysis isolates the examiner channel from other supervisory and institution-specific effects and from market conditions, and finds that examiner discretion can meaningfully shape intermediation and capital adequacy. Stricter examiners are associated with reduced bank risk-taking and slower loan growth, but are also tied to increased capital and decreased non-performing loans. The findings highlight how supervisory human capital, despite regulatory uniformity, can differentially affect risk, credit supply and may promote an uncertain regulatory environment for banks.
The Impact of Bank Examiners on Bank Risk Taking and Growth
Banks’ Credit Line Supply to Nonbanks and Financial Stability
With the prominence of both banks and non-bank mortgage companies (NMCs) in the U.S. mortgage market, questions arise as to the nature of the relationship between them. This paper finds complementarities between banks and NMCs in less liquid, more fragile segments of the banking sector during periods of stress—following the 2020 QE liquidity injection, less liquid banks extended more credit lines to NMCs while reducing direct mortgage-market exposure. This balance-sheet reallocation lowered banks’ vulnerabilities entering QT—as reflected in smaller MBS shares, shorter asset maturity, fewer unrealized losses and a lower share of uninsured deposits—thereby mitigating financial-stability risks. These effects were strongest for small or regional and better-capitalized banks. Thus, during this episode, more fragile banks provided contingent liquidity via credit lines to NMCs intermediating downstream mortgage credit.
Banks’ Credit Line Supply to Nonbanks and Financial Stability
The Procyclicality of FDIC Deposit Insurance Premiums
The potential procyclicality of cyclical adjustments to FDIC deposit insurance premiums is a concern for policymakers, yet research on the topic has been limited. This paper takes a novel approach by examining the effects of the 2009 and 2011 premium adjustments on loan growth. Using confidential supervisory data and a difference-in-differences design that treats credit unions as a control group, the analysis yields evidence of material, pro-cyclical effects on bank lending. Specifically, a 7-basis-point premium rise in the first quarter 2009 lowered bank loan-growth by about 2.4 percentage points relative to the control group, while conversely, a 7- to 10-basis-point decrease in 2011 lifted bank lending growth. Similarly, loan growth at credit unions declined following premium hikes imposed on the institutions later in 2009 and in 2010. Effects were concentrated among community banks. The findings bolster longstanding policy arguments for smoothing assessments across the cycle.
The Procyclicality of FDIC Deposit Insurance Premiums
Organizational Form and Thrift Risk During the US Housing Boom and Bust
This study examines the performance of smaller thrift institutions (of comparable size to community banks), distinguished by ownership structure (mutual versus stock ownership), during the 2001–06 boom and 2007–13 bust. The study finds, in a multivariate analysis, that mutual thrifts failed at far lower rates than stock thrifts. Beyond organizational type, only construction and land development lending concentration is predictive of failure. Additionally, the analysis finds that during the housing boom, stock thrifts bore increased risk compared to mutuals. Moreover, after accounting for ownership structure and market factors, the study finds no evidence of a higher failure rate of OTS supervised thrifts during the bust, nor of increased risk-taking by these thrifts during the boom.
Organizational Form and Thrift Risk During the US Housing Boom and Bust
Do G-SIBs Engage in Window-Dressing Behavior? An Empirical Analysis
This study explores the balance sheet management behavior of global systemically important banks (GSIBs) as they approach year-end regulatory reporting dates. Using supervisory data, the analysis finds patterns consistent with “window dressing.” Specifically, GSIBs reduce year-end exposures (thereby lowering capital buffer requirements) by a materially larger degree than comparable non-GSIBs; the GSIBs then rebuild their balance sheet positions early in the following year. This behavior is strongest for GSIB banks close to higher GSIB bucket thresholds and spans assets, debt securities issued, derivatives, trading assets and available-for-sale securities.
Do G-SIBs Engage in Window-Dressing Behavior? An Empirical Analysis
Securitization and the Value of Prepayment
Using data on SBA 7(a) loans and the program’s secondary market, this paper examines the role of securitization of small business loans, particularly in relation to loan prepayment, highlighting how securitization benefits borrowers with high prepayment propensities. This is demonstrated by examining the effects of a change in SBA remittance policy that reduced the return to securitizing pools with higher expected prepayment rates. The analysis finds that high-securitizing lenders responded by reducing their securitization activity and their lending to borrowers with high predicted prepayment probabilities, indicating that securitization normally expands credit to such borrowers. In addition, the analysis finds that over the longer term, borrowers with high prepayment propensities realize performance benefits from the expanded access to credit that securitization facilitates. In particular, they receive more favorable terms on subsequent borrowing and grow more, creating more jobs.
Securitization and the Value of Prepayment
Is it Credit?
This paper analyzes earned-wage-access (EWA) programs from both legal and consumer financial perspectives and argues that, when designed without recourse and without finance charges, they do not meet statutory definitions of “credit.” EWA programs typically do not impose late fees, delinquency charges or negative credit reporting in the event the third-party provider of the payment advance to the worker is not repaid by either the worker or the employer. Where expedited-delivery fees or voluntary tips exist, the authors contend these are not finance charges under Truth in Lending. The legal assessment emphasizes the absence of personal liability for nonrepayment and the lack of collection remedies characteristic of credit. Under this structure, regulating compliant EWA as credit would misclassify the product and risk undermining access to a wage-smoothing tool, although general consumer-protection laws still apply with respect to disclosures and fair dealing.
Chart of the Month
The Treasury General Account was low and stable until September 2008 after which it rose and became highly volatile. Reserve balances (deposits of banks at the Federal Reserve) rise and fall conversely with the TGA, so a volatile TGA complicates monetary policy. The orange line at the right is a forecast for the TGA from Lou Crandall at Wrightson ICAP. As can be seen, the TGA is projected to rise rapidly in coming weeks, reducing reserve balances substantially, possibly disrupting money markets.
Featured BPI Research
The Flawed NGFS Damage Function Is Even More Flawed Than We Thought
In November 2024, the Network for Greening the Financial System (NGFS) incorporated into its climate scenarios a new damage model, based on an academic paper in Nature, that projected unprecedented economic losses—19 percent of global real income by 2050 and 60 percent by 2100. Soon after, a BPI study identified serious statistical flaws in the NGFS modeling approach, and a subsequent academic paper identified a data error in the NGFS model that nearly tripled the estimates. The serious data error was known at least six weeks before the NGFS put its damage function into production. This new BPI research note finds that the Nature paper corrected the data error but then adjusted the model estimation and simulation procedure in a way that reproduced the original high loss estimates, retaining the model’s fundamental flaws. The note concludes that the damage function remains unsound and should be removed from the NGFS toolkit, and that the NGFS must improve its model review and governance procedures.
The Flawed NGFS Damage Function Is Even More Flawed Than We Thought
eSLR Reform Aligns Leverage Requirement with Original Objective
This blog post explains why the banking agencies’ June 2024 proposal to reform the enhanced supplementary leverage ratio (eSLR) is well justified. The original eSLR, adopted in 2014 as a backstop to risk-based capital requirements, has become more binding than intended due to the Federal Reserve’s sustained expansion of reserve balances. Elevated reserves increased banks’ holdings of zero-risk-weighted assets, depressing leverage ratios and creating incentives to shed low-risk assets while discouraging Treasury market intermediation. The agencies’ June 2025 proposal would replace the fixed two-point eSLR buffer with one-half of each GSIB’s method 1 surcharge, reducing the weighted-average requirement by 114 basis points. This adjustment corrects for reserve-driven distortions, returns the leverage ratio to its supplementary role and is consistent with evidence from the Global Financial Crisis that risk-based capital, not leverage ratios, better predicts bank failures.
eSLR Reform Aligns Leverage Requirement with Original Objective
Conferences & Symposiums
9/25/2025 – 9/26/2025
The 24th Annual Bank Research Conference
FDIC Center for Financial Research, Arlington, VA
More Information
9/25/2025 – 9/26/2025
Fourth Annual International Roles of the U.S. Dollar Conference
Federal Reserve Bank of New York
More Information
9/29/2025 – 9/30/2025
Inflation: Drivers and Dynamics Conference 2025
Federal Reserve Bank of Cleveland and European Central Bank
More Information
10/3/2025 – 10/4/2025
Georgia State University AI and Fintech Conference: Announcement and Call for Papers
Atlanta, GA
More Information
10/9/2025
2025 Cyber Risk in the Financial Sector Conference
Board of Governors of the Federal Reserve System, Federal Reserve Bank of Richmond, and MIT
Boston, MA
More Information
10/9/2025
Community Bank Conference
Board of Governors of the Federal Reserve System
More Information
10/9/2025
14th Annual Financial Institutions and Law Enforcement Cybersecurity Conference: Fraud Trends, Lessons, and Insights
Federal Reserve Bank of Philadelphia
More Information
10/10/2025
2nd Annual Conference on Macro-Finance Research:
Federal Reserve Bank of San Francisco
More Information
10/10/2025
19th Annual Consumer Bankers Symposium
Federal Reserve Bank of Chicago
More Information
10/10/2025 – 10/11/2025
2025 Wharton Conference on Liquidity and Financial Fragility
Philadelphia, PA
More Information
10/15/2025
2025 Stress Test Modeling Symposium
Federal Reserve Bank of Boston
More Information
10/16/2025
Workshop on Third-Party Service Provider Risks in the Economy and Financial System
Federal Reserve Bank of Dallas
More Information
10/30/2025 – 10/31/2025
Improving Financial Regulation for an Evolving Environment
Federal Reserve Bank of Atlanta and Georgia State University
More Information
11/6/2025 – 11/7/2025
New Perspectives on Consumer Behavior in Credit and Payments Markets Conference – 2025
Federal Reserve Bank of Philadelphia
More Information
11/6/2025 – 11/7/2025
Annual Bank of Canada Economic Conference
Bank of Canada, Ottawa
More Information
11/7/2025 – 11/8/2025
14th Annual Fixed Income and Financial Institutions Conference: Announcement and Call for Papers
University of South Carolina, Columbia, SC
More Information
11/12/2025
The 2025 U.S. Treasury Market Conference
Federal Reserve Bank of New York
More Information
11/20/2025 – 11/21/2025
2025 Financial Stability Conference
Federal Reserve Bank of Cleveland
More Information
11/21/2025 – 11/22/2025
69th Economic Conference: The U.S. Economy in a Changing Global Landscape
Federal Reserve Bank of Boston
More Information
11/24/2025 – 11/25/2025
4th CEMLA/Dallas Fed Financial Stability Conference
Federal Reserve Bank of Dallas, San Antonio Branch
More Information
11/25/2025 – 11/26/2025
24th Annual FDIC Bank Research Conference
Arlington, VA
More Information
1/2/2026
19th Annual Day Ahead Conference on Financial Markets and Institutions: Announcement and Call for Papers
Federal Reserve Bank of Philadelphia
More Information
