Deposit Insurance and Credit Union Lending

50 Pages Posted: 20 Apr 2021 Last revised: 28 Mar 2022

See all articles by Linh Nguyen

Linh Nguyen

University of St. Andrews

John O. S. Wilson

University of St. Andrews

Tuan Le

affiliation not provided to SSRN

Hiep Luu

University of St. Andrews

Tram-Anh Nguyen

affiliation not provided to SSRN

Xuan Vinh Vo

University of Economics Ho Chi Minh City

Date Written: January 27, 2022

Abstract

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

Nguyen, Linh and Wilson, John O. S. and Le, Tuan and Luu, Hiep and Nguyen, Tram-Anh and Vo, Xuan Vinh, Deposit Insurance and Credit Union Lending (January 27, 2022). Journal of Financial Stability, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3821558 or http://dx.doi.org/10.2139/ssrn.3821558

Linh Nguyen (Contact Author)

University of St. Andrews ( email )

The Gateway
North Haugh
St Andrews, Fife KY16 9RJ
United Kingdom

John O. S. Wilson

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

Tuan Le

affiliation not provided to SSRN

Hiep Luu

University of St. Andrews ( email )

The Gateway, North Haugh, St Andrews
St Andrews, Fife KY16 9SS
Great Britain

Tram-Anh Nguyen

affiliation not provided to SSRN

Xuan Vinh Vo

University of Economics Ho Chi Minh City ( email )

Ho Chi Minh City, Ho Chi Minh City
Vietnam

HOME PAGE: http://www.ueh.edu.vn

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