Small business lending among the largest U.S. financial institutions has weakened due to constraints from the Federal Reserve’s stress tests and capital surcharges for systemically important banks. BPI research finds that originations of small business loans from banks subject to CCAR remained depressed after 2010 and are just about 65 percent of their level in 2006 while originations from banks not subject to the stress tests have recovered somewhat in the post-crisis period. Furthermore, the share of small business loans made in low-and moderate-income neighborhoods by CCAR banks has been steadily declining since 2012 while LMI small business loan share by banks not subject to CCAR have increased. Small businesses account for 66% of new jobs and the decline in credit availability to small businesses results has a detrimental impact on employment growth. Moreover, tight access to bank loans also pushes borrowers in LMI communities to less stable sources of credit such as nonbanks.
The Clearing House (TCH) published a new working paper, “Capital Requirements in Supervisory Stress Tests and their Adverse Impact on Small Business Lending” that estimates the implicit capital requirements in the… Continue Reading
The Clearing House (TCH) published a new research note “Are the Supervisory Bank Stress Tests Constraining the Supply of Credit to Small Businesses?” that attempts to identify the impact of… Continue Reading
Mortgage and small business loans are hard hit by stress tests The Clearing House published a new research note The Capital Allocation Inherent in the Federal Reserve’s Capital Stress Test that attempts… Continue Reading
In this TCH research note we show that the positive relationship between bank capitalization and the growth of lending is driven by the amount of capital in excess of capital… Continue Reading