Evidence of an operative credit channel has been inconclusive. The inability to clearly distinguish the effects of shocks to loan supply from those to loan demand has made it difficult to quantify the importance of this transmission mechanism to the economy. This paper provides an innovative...

Since August 1995, Japanese banks have had to pay a premium on Eurodollar and Euroyen interbank loans relative to their U.S. and U.K. competitors. This so-called Japan premium provides a market indicator of investor anxiety about the ability of Japanese banks to repay loans. We examine the...

The dramatic 70 percent decline in Japanese commercial real estate prices from their peak in 1990 provides a natural experiment to test the extent to which a loan supply shock can affect real economic activity. Because the shock was external to U.S. credit markets, yet connected through the...

The large size of Japanese bank lending operations in the United States enables us to use U.S. banking data to investigate the extent to which the sharp decline in Japanese stock prices was transmitted to the United States via U.S. branches of Japanese parent banks, as well as to identify a...

A key provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 was prompt corrective action (PCA). PCA emphasized early intervention by bank supervisors and was intended to limit forbearance by making supervisory intervention more timely and less discretionary. However,...

Derivatives have become an essential instrument for hedging risks, yet moral hazard can lead to their misuse by problem banks. Given that the absence of comprehensive data on bank derivatives activities prevents an accurate assessment of bank risk-taking, banks have an opportunity to take...

Concern with the potential effect of bank mergers on small business lending has stemmed from a belief that larger acquirers may be less willing than their smaller targets to be active in the small business lending market. However, we find that in roughly half the commercial and savings bank...

Whether central banks should play an active role in bank supervision and regulation is being debated both in the United States and abroad. While the Bank of England has recently been stripped of its supervisory responsibilities and several proposals in the United States have advocated removing...

Recent studies have found that banks with low capital ratios have significantly decreased their lending to the real estate sector. This correlation between real estate lending and bank capital could be the result of voluntary decisions by banks to recapitalize, or it could be the result of...

We examine the stock market reaction to announcements of formal supervisory actions. We find that the variation in the quality and timeliness of disclosure by U.S. banks explains much of the variation in the market's reactions. We also find that these announcements can cause spillover effects....