Does Bank Supervision Impact Bank Loan Growth?

48 Pages Posted: 13 May 2015

See all articles by Paul Kupiec

Paul Kupiec

American Enterprise Institute

Yan Y. Lee

Government of the United States of America - Federal Deposit Insurance Corporation (FDIC)

Claire M. Rosenfeld

College of William and Mary - Finance

Date Written: May 11, 2015

Abstract

We estimate the impact on individual bank loan growth caused by supervisory restrictions associated with a poor bank examination rating. We use a novel approach to control for bank loan demand variation and estimate a fixed-effect model using an unbalanced panel with over 443,000 bank-quarter observations from the period 1994-2011. Our estimates show that supervisory restrictions have a large negative impact on bank loan growth after controlling for the impact of monetary policy, bank capital and liquidity conditions and any voluntary reduction in lending triggered by weak legacy loan portfolio performance or other bank losses.

Keywords: Bank supervision, bank loan growth, bank capital, bank liquidity

JEL Classification: E58, G28, G21

Suggested Citation

Kupiec, Paul and Lee, Yan Y. and Rosenfeld, Claire M., Does Bank Supervision Impact Bank Loan Growth? (May 11, 2015). Available at SSRN: https://ssrn.com/abstract=2603850 or http://dx.doi.org/10.2139/ssrn.2603850

Paul Kupiec (Contact Author)

American Enterprise Institute ( email )

1789 Massachusetts ave NW
Washington DC, DC 20036
United States
2028627167 (Phone)

Yan Y. Lee

Government of the United States of America - Federal Deposit Insurance Corporation (FDIC) ( email )

550 17th Street NW
Washington, DC 20429
United States

Claire M. Rosenfeld

College of William and Mary - Finance ( email )

VA
United States

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