Deposit Insurance and Credit Union Lending
50 Pages Posted: 20 Apr 2021 Last revised: 28 Mar 2022
Date Written: January 27, 2022
We exploit an exogenous change in the coverage of insured deposits following the passage of the Emergency Economic Stabilization Act (2008) to investigate the impact of deposit insurance on the volume, composition and quality of credit union lending. Using a difference-in-difference approach, we find changes in the volume, composition and riskiness of credit union lending. Specifically, we find that affected credit unions increase total and unsecured lending, leading to a decline in loan quality. Overall, our results suggest that an increase in the maximum coverage of insured deposits induces credit unions to lend more at the expense of loan quality.
Keywords: Deposit Insurance, Lending, Loan Quality, Credit Unions, Emergency Economic Stabilization Act
JEL Classification: G21; G28
Suggested Citation: Suggested Citation