The risk implications of the business loan activity in credit unions

US credit unions have been subject to a strict regulation of their commercial lending which included both requirements for enhanced organizational practices and a cap on the proportion of business loans relative to assets (imposed in 1998 by US Congress). Since 2003, however, these limitations have...

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Detalhes bibliográficos
Autores: Gómez Biscarri, Javier, López-Espinosa, Germán, Mesa-Toro, Andrés
Formato: artículo
Estado:Versión publicada
Fecha de publicación:2021
País:España
Recursos:Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)
Repositorio:Recercat. Dipósit de la Recerca de Catalunya
OAI Identifier:oai:recercat.cat:10230/58746
Acesso em linha:http://hdl.handle.net/10230/58746
http://dx.doi.org/10.1016/j.jfs.2021.100932
Access Level:acceso abierto
Palavra-chave:Credit unions
Business loans
Depositor discipline
Asset risk
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spelling The risk implications of the business loan activity in credit unionsGómez Biscarri, JavierLópez-Espinosa, GermánMesa-Toro, AndrésCredit unionsBusiness loansDepositor disciplineAsset riskUS credit unions have been subject to a strict regulation of their commercial lending which included both requirements for enhanced organizational practices and a cap on the proportion of business loans relative to assets (imposed in 1998 by US Congress). Since 2003, however, these limitations have been steadily relaxed, a process which has resulted in an increase in credit union business lending activity. Using data from the universe of US credit unions we provide comprehensive evidence that expansion of the business loan portfolio increases the risk of the asset side of the credit union. This is the case even for credit unions which benefit from partnership with the SBA, for which we observe an initial increase in the risk of non-SBA backed loans (an overconfidence effect) which reverses over time (a learning effect). Our results suggest, furthermore, that the risk of business loans is exacerbated for credit unions which initiate their business loan activity and which do so rapidly. In the second part of our analysis we provide descriptive and quasi-experimental evidence that expansions of credit union activity into business loans are associated with lower subsequent growth rates of deposits. This result is similar to the reaction to risk indicators found in the banking literature and might give an ex-ante incentive for the CU that could work as a market-based stabilization mechanism complementary to that of explicit regulation.Andrés Mesa Toro acknowledges financial support from “Asociación de Amigos – Universidad de Navarra” and from Spanish Ministry of Science and Innovation through project PID2019-105227RB-100. Germán López-Espinosa acknowledges financial support from the Spanish Ministry of Education through project ECO2012-33619 and ECO2016-78254, and from Spanish Ministry of Science and Innovation through project PID2019-105227RB-100 Javier Gomez-Biscarri acknowledges financial support from the Spanish Ministry of Economy through projects ECO2017-88509-P and PID2020-118541GB-I00, and from the Serra Húnter Program.Elsevier202420242021info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdfapplication/pdfhttp://hdl.handle.net/10230/58746http://dx.doi.org/10.1016/j.jfs.2021.100932reponame:Recercat. Dipósit de la Recerca de Catalunyainstname:Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)InglésJournal of Financial Stability. 2021;56:100932.info:eu-repo/grantAgreement/ES/2PE/PID2019-105227RB-100info:eu-repo/grantAgreement/ES/3PN/ECO2012-33619info:eu-repo/grantAgreement/ES/1PE/ECO2016-78254info:eu-repo/grantAgreement/ES/2PE/PID2019-105227RB-100info:eu-repo/grantAgreement/ES/2PE/ECO2017-88509-Pinfo:eu-repo/grantAgreement/ES/2PE/PID2020-118541GB-I00© 2021 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).http://creativecommons.org/licenses/by/4.0/info:eu-repo/semantics/openAccessoai:recercat.cat:10230/587462026-05-29T05:05:01Z
dc.title.none.fl_str_mv The risk implications of the business loan activity in credit unions
title The risk implications of the business loan activity in credit unions
spellingShingle The risk implications of the business loan activity in credit unions
Gómez Biscarri, Javier
Credit unions
Business loans
Depositor discipline
Asset risk
title_short The risk implications of the business loan activity in credit unions
title_full The risk implications of the business loan activity in credit unions
title_fullStr The risk implications of the business loan activity in credit unions
title_full_unstemmed The risk implications of the business loan activity in credit unions
title_sort The risk implications of the business loan activity in credit unions
dc.creator.none.fl_str_mv Gómez Biscarri, Javier
López-Espinosa, Germán
Mesa-Toro, Andrés
author Gómez Biscarri, Javier
author_facet Gómez Biscarri, Javier
López-Espinosa, Germán
Mesa-Toro, Andrés
author_role author
author2 López-Espinosa, Germán
Mesa-Toro, Andrés
author2_role author
author
dc.subject.none.fl_str_mv Credit unions
Business loans
Depositor discipline
Asset risk
topic Credit unions
Business loans
Depositor discipline
Asset risk
description US credit unions have been subject to a strict regulation of their commercial lending which included both requirements for enhanced organizational practices and a cap on the proportion of business loans relative to assets (imposed in 1998 by US Congress). Since 2003, however, these limitations have been steadily relaxed, a process which has resulted in an increase in credit union business lending activity. Using data from the universe of US credit unions we provide comprehensive evidence that expansion of the business loan portfolio increases the risk of the asset side of the credit union. This is the case even for credit unions which benefit from partnership with the SBA, for which we observe an initial increase in the risk of non-SBA backed loans (an overconfidence effect) which reverses over time (a learning effect). Our results suggest, furthermore, that the risk of business loans is exacerbated for credit unions which initiate their business loan activity and which do so rapidly. In the second part of our analysis we provide descriptive and quasi-experimental evidence that expansions of credit union activity into business loans are associated with lower subsequent growth rates of deposits. This result is similar to the reaction to risk indicators found in the banking literature and might give an ex-ante incentive for the CU that could work as a market-based stabilization mechanism complementary to that of explicit regulation.
publishDate 2021
dc.date.none.fl_str_mv 2021
2024
2024
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/10230/58746
http://dx.doi.org/10.1016/j.jfs.2021.100932
url http://hdl.handle.net/10230/58746
http://dx.doi.org/10.1016/j.jfs.2021.100932
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv Journal of Financial Stability. 2021;56:100932.
info:eu-repo/grantAgreement/ES/2PE/PID2019-105227RB-100
info:eu-repo/grantAgreement/ES/3PN/ECO2012-33619
info:eu-repo/grantAgreement/ES/1PE/ECO2016-78254
info:eu-repo/grantAgreement/ES/2PE/PID2019-105227RB-100
info:eu-repo/grantAgreement/ES/2PE/ECO2017-88509-P
info:eu-repo/grantAgreement/ES/2PE/PID2020-118541GB-I00
dc.rights.none.fl_str_mv http://creativecommons.org/licenses/by/4.0/
info:eu-repo/semantics/openAccess
rights_invalid_str_mv http://creativecommons.org/licenses/by/4.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
application/pdf
dc.publisher.none.fl_str_mv Elsevier
publisher.none.fl_str_mv Elsevier
dc.source.none.fl_str_mv reponame:Recercat. Dipósit de la Recerca de Catalunya
instname:Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)
instname_str Varias* (Consorci de Biblioteques Universitáries de Catalunya, Centre de Serveis Científics i Acadèmics de Catalunya)
reponame_str Recercat. Dipósit de la Recerca de Catalunya
collection Recercat. Dipósit de la Recerca de Catalunya
repository.name.fl_str_mv
repository.mail.fl_str_mv
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