Selected Outside Research
Banks’ Specialization and Private Information
This paper examines how different types of specialization in bank lending—geographic and sectoral—relate to commercial credit performance. The analysis uses Spanish credit registry data covering nearly 100 banks from 2018-2024. The research finds that banks typically concentrate 30-40 percent of their lending in specific municipalities or sectors. The authors find geographic specialization in lending to small firms and sectoral specialization for larger firms are associated with lower default frequencies.
Banks’ Specialization and Private Information
The Economics of Capital Buffer Usability
This paper develops a model aimed at understanding banks’ use of capital buffers. Three considerations are emphasized: (1) the bank’s preferred margin over the regulatory minimum (“capacity hurdle”); (2) the bank’s ability to rebuild buffers with sufficient speed (“supervisory hurdle”); and (3) the implications of buffer usage for creating shareholder value (“management hurdle”). The parameters of the model are then calibrated using monthly data covering 159 publicly listed banks in the United States and Europe from March 2018 to June 2024, to perform a simulation analysis of capital buffer usability. Expected profitability emerges as the primary determinant of buffer usability—banks with higher forward-looking returns are more inclined to deploy capital, although capital headroom (capacity above the regulatory minimum) also matters. The paper concludes by recommending that authorities improve the economics of using capital buffer by setting credible rebuild timelines, allowing for post-release capital targets below pre-release levels and simplifying the overly complex regulatory framework.
The Economics of Capital Buffer Usability
Banks and Capital Requirements: Evidence from Countercyclical Buffers
This research examines bank responses to higher countercyclical capital buffer (CCyB) requirement, focusing on the use of credit default swaps (CDS) to reduce regulatory capital charges. The analysis links transaction-level CDS data from EU regulatory reports with syndicated loan data at the bank-firm-month level and exploits cross-country variation in regulatory CCyB implementation between November 2017 and April 2024, controlling for various bank and firm characteristics. The analysis finds that when countries raise their CCyB, banks significantly increase their use of CDS, thereby insulating themselves from higher capital requirements. The findings reveal that credit risk transfer via CDS markets is an important mechanism by which banks adjust to higher capital requirements, enabling them to maintain credit supply.
Banks and Capital Requirements: Evidence from Countercyclical Buffers
Intermediating Geoeconomic Risks: Country Expertise and Syndicate Composition in Loan Markets
Geoeconomic risks—disruptions from political events, sanctions or institutional breakdowns in export markets—can’t be hedged like typical financial risks, and they create information problems for lenders trying to assess borrower creditworthiness. This paper presents evidence based on syndicated loans to U.S. firms from 2004-2019 that banks with specialized knowledge of export markets help firms access credit, particularly during periods of geopolitical uncertainty, by acting as information intermediaries. The analysis demonstrates that lead arrangers with expertise in a borrower’s main export market draw in participants who have little knowledge of the market, and that this effect is strongest when export destinations face elevated geoeconomic uncertainty. It also finds that these lead arrangers mitigate and often fully offset the increase in loan spreads that typically accompany elevated geoeconomic risk. Thus, the paper demonstrates how specialized knowledge—in this case the expert ability of the lead arranger to screen and monitor foreign-market risks—facilitates international credit flows during geopolitical disruptions by allowing less-informed lenders to participate.
Intermediating Geoeconomic Risks: Country Expertise and Syndicate Composition in Loan Markets
Bank Balance Sheet Constraints and Municipal Finance: Evidence from Current Expected Credit Losses
This paper presents an empirical analysis of the effects of bank adoption of the Current Expected Credit Loss (CECL) approach for provisioning on municipal bond markets. The analysis compares pre- and post-adoption outcomes as of Q1 2020 for banks implementing CECL at that time (adopters) versus non-adopters, and for states with a high concentration of adopters versus other states, using a difference-in-differences methodology. The analysis finds a significant reduction in the municipal bond holdings of adopters, with larger reductions for capital-constrained banks. The research also finds a rise in borrowing costs for local governments, reflected in significantly higher bond yields for school districts in states with higher exposure to CECL-adopting banks, with subsequent reductions in bond issuance by these districts.
Bank Balance Sheet Constraints and Municipal Finance: Evidence from Current Expected Credit Losses
The Role of Credit Lines in Funding Corporate Takeovers
This paper provides a comprehensive analysis of how companies fund cash acquisitions using manually collected data from SEC filings, press releases and news reports for 1,400 deals closed between 1994 and 2020. The analysis reveals that credit lines play a central role in such transactions, financing all or part of the cash payment in 57 percent of deals. One-third of the credit lines used for acquisitions are existing facilities; the remainder are new or amended lines. The analysis suggests a financial flexibility role of existing credit lines, as deals financed with existing lines close fastest with the drawdowns typically refinanced within four to five months. In the case of new or amended bank credit lines, the evidence indicates a screening and certification role by banks. In particular, acquisitions financed with new or amended lines are associated with higher bidder announcement returns and higher combined returns compared to other cash deals. Top-tier commercial banks amplify this effect, and new term bank loans show similar gains.
The Role of Credit Lines in Funding Corporate Takeovers
Banks in the Age of Stablecoins: Some Possible Implications for Deposits, Credit, and Financial Intermediation
This paper explores potential implications of stablecoin growth for bank deposits, lending and payments. The authors highlight that these outcomes will depend on the composition of demand for stablecoins; how issuers allocate reserves; and how banks adapt to the evolving competitive landscape. For instance, foreign demand for USD stablecoins could increase U.S. bank deposits via funds deposited by foreign issuers. On the lending side, the discussion emphasizes that deposit migration would constrain lending through three channels: balance sheet capacity; increased funding costs; and regulatory constraints (liquidity buffer requirements), with “back of the envelope” type calculations suggesting potentially material reductions in lending. The discussion emphasizes that large banks, due to diversified funding, wholesale market access and ability to invest in tokenized deposits or in custody services for stablecoin issuers are well positioned to adapt to the growth in stablecoin usage.
An Empirical Analysis of the Cost of Borrowing
This paper explores nonfinancial firms borrowing costs merging bond and bank loan databases that cover virtually all U.S. corporate bonds and over 90% of bank loans. Building on prior work that measured the Excess Bond Premium for senior unsecured bonds, this paper develops the Excess Debt Premium (EDP)—a measure of residual credit spread after controlling for the amount, maturity, and other observable characteristics of the debt. A key result is that after controlling for a comprehensive set of borrower and instrument characteristics, financing costs are significantly lower for bank loans compared to bonds. The analysis also indicates a large degree of dispersion in borrowing costs as measured by the EDP, even across different debt instruments of the same firm issued within the same quarter.
An Empirical Analysis of the Cost of Borrowing
Boundaries: Evidence from Bank Branch Consolidation
This research develops a nonparametric statistical method to estimate spatially diminishing treatment effects, applying this to analyze the effects on residential mortgage applications of bank branch openings and closures post 2010. The findings reveal that branch proximity significantly affects loan application volume (8.5 percent decline per 10 miles) but has no effect on approval rates—suggesting branches boost demand through local visibility while lending decisions remain centralized. Regarding branch closures, the paper finds a counterintuitive pattern: high-income areas experience more closures, which is attributed to strategic consolidation of redundant branches in over-banked wealthy urban areas.
An Empirical Analysis of the Cost of Borrowing
Chart of the Month
The chart tracks key interest rates relative to the Federal Reserve’s target range throughout 2025. The effective federal funds rate (EFFR) and the tri-party general collateral rate (TGCR) both moved up in the target range and relative to the interest on reserve balances (IORB) rate paid by the Fed, particularly since September (as shown in the right panel). The data are obtained from the Federal Reserve Bank of St. Louis FRED database.
Featured BPI Research
Recalibrating the Formula for Determining Securitization Capital Requirements
Securitization is an important source of market-based finance, but issuance has remained subdued since the Global Financial Crisis. Policymakers have cited the post-crisis capital framework – particularly the Simplified Supervisory Formula Approach (SSFA) – as a constraining factor. This note summarizes new research identifying three main limitations of the current SSFA calibration: limited flexibility resulting in a tradeoff between conservatism and risk sensitivity; presence of a securitization capital surcharge even when underlying assets are performing, and the fixed 1.6 percent capital floor and absence of a cap, which can misalign senior-tranche capital with actual risk. The authors propose specific modifications to the SSFA toward resolving these limitations.
Recalibrating the Formula for Determining Securitization Capital Requirements
Banks, Capital and Competitiveness: Challenges with an ECB Working Paper
A recent working paper published by the ECB estimates that a bank’s profit efficiency tends to be maximized at a common equity tier 1 ratio of about 18 percent, which is interpreted as evidence that high capital requirements do not impair competitiveness. This article critiques the analysis in that paper, arguing that it offers limited guidance for capital policy. Key weaknesses cited include the absence of underlying statistical detail, the sensitivity of the efficiency estimate to measurement error and lack of explicit consideration of the effects of higher capital requirements on banks’ funding costs and ability to compete across jurisdictions
Banks, Capital and Competitiveness: Challenges with an ECB Working Paper
Who Remains Unbanked in the United States and Why
This Federal Reserve Bank of Philadelphia working paper co-authored by BPI’s Senior Fellow Paul Calem conducts a detailed exploration of the factors associated with unbanked status among U.S. households and how these relationships evolved between 2015 and 2019. The analysis finds that while the unbanked percentage of the population declined substantially over this period, unbanked status became more concentrated among single individuals and disabled individuals, and less concentrated among younger households. Additional factors identified by the analysis include lack of digital access and non-citizen immigrant status, both associated with significantly higher likelihood of being unbanked. Identified state-level relationships include an association between financial literacy measures and percent unbanked. Unknown structural factors still pose a challenge to explaining who is unbanked, especially regarding gaps by race and ethnicity, underscoring a need to capture more granular data on the unbanked.
Who Remains Unbanked in the United States and Why
Conferences & Symposiums
2/19/2026
Joint Conference on Financial Crises
Federal Reserve Bank of Chicago
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2/20/2026
Columbia/BPI Annual Bank Regulation Research Conference: Announcement and Call for Papers
Columbia University, New York City
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2/24/2026
Conference on Technology Enabled Disruption
Federal Reserve Bank of Boston
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3/23/2026 – 3/26/2026
2026 Federal Reserve National Community Investment Conference
Phoenix, AZ
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3/26/2026 – 3/27/2026
2026 Georgia Tech-Atlanta Fed Household Finance Conference: Announcement and Call for Papers
Atlanta, GA
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4/3/2026
Fintech and Financial Institutions Research Conference: Announcement and Call for Papers
Federal Reserve Bank of Philadelphia and University of Delaware
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5/7/2026 – 5/8/2026
13th Annual Conference on Financial Market Regulation: Announcement and Call for Papers
The Securities and Exchange Division of Economic and Risk Analysis
Washington, D.C.
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5/14/2026 – 5/15/2026
Mortgage Market Research Conference
Federal Reserve Bank of Philadelphia
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5/18/2026
European University Institute/BPI 2026 Research Conference on Banking Regulation: Announcement and Call for Papers
Florence, Italy
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5/27/2026 – 5/29/2026
Boulder Summer Conference on Consumer Financial Decision Making
University of Colorado, Boulder
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6/22/2026 – 6/23/2026
Fifth Conference on the International Roles of the U.S. Dollar: Announcement and Call for Papers
Federal Reserve Board, Washington, D.C.
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6/25/2026 – 6/26/2026
2026 New York Fed Innovation Conference
Federal Reserve Bank of New York
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9/2/2026 – 9/3/2026
Edinburgh Financial Technology Conference: Announcement and Call for Papers
University of Edinburgh Business School, Edinburgh, Scotland
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