Deposit insurance and credit union lending

Linh  Nguyen; John Ogilvie Stephen Wilson; Tuan Le; Hiep N. Luu; Tram-Anh Nguyen; Vinh Vo

doi:10.1016/j.jfs.2022.101003

Deposit insurance and credit union lending

Linh Nguyen, John Ogilvie Stephen Wilson^*, Tuan Le, Hiep N. Luu, Tram-Anh Nguyen, Vinh Vo

^*Corresponding author for this work

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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.

Original language	English
Article number	101003
Number of pages	16
Journal	Journal of Financial Stability
Volume	60
Early online date	31 Mar 2022
DOIs	https://doi.org/10.1016/j.jfs.2022.101003
Publication status	Published - Jun 2022

Keywords

Deposit insurance
Lending
Loan quality
Credit unions
Emergency Economic Stabilization Act

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10.1016/j.jfs.2022.101003

Nguyen_2022_JoFS_Deposit-insurance-credit-union-lending_AAM
Copyright © 2022 Elsevier B.V. All rights reserved. This work has been made available online in accordance with publisher policies or with permission. Permission for further reuse of this content should be sought from the publisher or the rights holder. This is the author created accepted manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1016/j.jfs.2022.101003
Accepted author manuscript, 346 KBLicence: CC BY-NC-ND

Cite this

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title = "Deposit insurance and credit union lending",

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",

author = "Linh Nguyen and Wilson, {John Ogilvie Stephen} and Tuan Le and Luu, {Hiep N.} and Tram-Anh Nguyen and Vinh Vo",

year = "2022",

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AU - Nguyen, Linh

AU - Wilson, John Ogilvie Stephen

AU - Le, Tuan

AU - Luu, Hiep N.

AU - Nguyen, Tram-Anh

AU - Vo, Vinh

PY - 2022/6

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N2 - 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.

AB - 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.

KW - Deposit insurance

KW - Lending

KW - Loan quality

KW - Credit unions

KW - Emergency Economic Stabilization Act

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DO - 10.1016/j.jfs.2022.101003

M3 - Article

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VL - 60

JO - Journal of Financial Stability

JF - Journal of Financial Stability

M1 - 101003

ER -

Deposit insurance and credit union lending

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Keywords

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