Research Exchange: April 2026

Selected Outside Research

Bank Regulation, Construction Financing and the Supply of New Housing

After the Global Financial Crisis, new home construction remained historically low even as the housing market recovered. This paper demonstrates a link between this slowdown and post-GFC regulatory reforms, including Dodd-Frank Act stress tests, which treated construction loans as among the riskiest bank assets. A key finding is that homebuilders with pre-reform relationships with stress-tested banks saw a 31.5 percent decline in borrowing and an 11.1 percent decline in home sales relative to homebuilders tied to non-stress-tested banks. Also, lending relationships with stress-tested banks were 12.4 percentage points more likely to be terminated after the reforms, with affected homebuilders searching farther for credit with borrowing distances rising 27.3 percent. Counties more exposed to stress-tested banks saw 13.8 percent declines in construction loan originations and an additional 3.7 percent rise in house prices - accounting for roughly one-fifth of observed house price growth between 2013 and 2017.

Bank Regulation, Construction, and the Supply of New Housing

The Hidden Plumbing of Stablecoins: Financial and Technological Risks in the GENIUS Act Era

The passage of the GENIUS Act in 2025 established the first comprehensive federal framework for stablecoins relating to reserve quality, transparency and supervisory oversight. The paper argues that while the law brings fundamental improvements in those areas, it leaves some key financial stability questions unresolved. One concern is that stablecoin issuers' ability to redeem their tokens at par may be compromised under stress as surges in redemption demand could overwhelm market intermediation capacity. . Additionally, blockchain-based infrastructure is subject to operational risks distinct from traditional payment systems, such as smart contract bugs, cyber risks and governance vulnerabilities. The GENIUS Act also leaves unresolved questions about applicability of regulatory capital requirements to stablecoin issuers and whether issuers should have access to Federal Reserve liquidity facilities.

The Hidden Plumbing of Stablecoins: Financial and Technological Risks in the GENIUS Act Era

Community Bank Lending around Regulatory Thresholds

This paper examines the behavior of community banks (those under $10 billion in assets) as they approach important regulatory asset size thresholds. Crossing these thresholds, at $500 million and $1/$3 billion, would trigger progressively more costly reporting and governance requirements - including additional call report data items, mandatory audits, stricter internal controls oversight, and independent audit committees. Using 6,841 bank-quarter observations from 2012-2024, the paper finds that banks actively manage their growth to avoid these thresholds: asset growth is 10-16 percent lower for banks just below these thresholds compared to banks just above them. This size management is implemented primarily through reduced lending, which falls disproportionately on the relationship-lending arrangements in which community banks specialize. For instance, banks just below thresholds reject more home mortgage applications, particularly from minority applicants, female applicants, lower-income borrowers and those without co-applicants, and they issue fewer small business loans. In addition, the paper presents evidence that this reduced lending translates into lower business formation and slower wage growth in affected localities.

Community Bank Lending around Regulatory Thresholds

Securities Losses and the Bank Collateral Channel of Monetary Transmission

As interest rates rise, the market value of securities held on banks' balance sheets declines - especially for longer-duration instruments. This paper demonstrates that the resulting loss of value of these securities as collateral for interbank borrowing affects credit supply, even when banks remain well-capitalized and regulatory capital is unaffected. Using euro area data, the paper finds that a one-standard-deviation increase in securities losses is associated with a 3.8 percent decline in interbank borrowing and a 2.5 percent decline in corporate lending. Affected banks also charge higher interest rates and shorten loan maturities. The analysis indicates that only losses on pledgeable securities matter - losses on non-pledgeable securities have negligible effects, ruling out simple net-worth deterioration as the driver. Effects show up in secured (repo) borrowing but not unsecured interbank loans, further confirming the collateral mechanism.

Securities Losses and the Bank Collateral Channel of Monetary Transmission

Market Power in Mortgage Pricing: The Role of Referral Lending

This paper investigates the relationship between referral relationships between realtors and loan officers and dispersion in mortgage pricing. Using a novel dataset linking 81,306 realtors to 102,860 loan officers across 703 counties, the paper finds that 85 percent of realtors direct over 40 percent of their clients to fewer than four loan officers. Referred borrowers pay 18.6 basis points more in mortgage rates - equivalent to $569 in additional annual interest or $2,609 in upfront costs on an average loan. Referral lending accounts for 36.5 percent of the average rate spread and explains half of all residual variation in mortgage pricing after controlling for lender, market and time factors. The referral markups reflect both steering borrowers toward higher-cost lenders, and additional markups at the individual loan officer level.

Market Power in Mortgage Pricing: The Role of Referral Lending

How CCyBs Travel - Internal Capital Markets & Domestic Borrowing

Banks in the EU are subject to countercyclical capital buffer requirements (CCyBs) that are specific to individual exposures as determined by the jurisdiction in which the exposure is located. This paper examines the response of interbank borrowing in the EU to CCyBs that differ across jurisdictions and the role of multinational banking corporations (MNCs) in shaping this response. The analysis focuses on German MNCs and their subsidiaries during 2015 onward, which provide a natural laboratory, since German MNCs faced no change in their domestic CCyB during this period, while their foreign subsidiaries were exposed to tightening in various countries. The analysis finds that interbank lending to affected subsidiaries contracted, both in loan volumes and through relationship termination, and is replaced by financing from parent companies. Subsidiary total liabilities and default risk remain unchanged, while parents finance their expanded internal lending by external domestic borrowing, raising parent leverage and probability of default.

How CCyBs Travel - Internal Capital Markets & Domestic Borrowing

Does Banking Consolidation Harm Households?

This paper examines the effects of banking consolidation on residential mortgage borrowers, using data on nearly 5,000 bank mergers over three decades. The analysis finds no evidence that merging banks acquire market power, reflected in no significant effects on loan pricing and loan approval rates of the merged institution relative to peers. The paper also documents that, despite dramatic national-level consolidation, local mortgage markets remain highly fragmented, with local concentration levels staying well below regulatory thresholds. The paper also finds evidence that larger acquiring banks tend to target profitable, relationship-intensive community banks that hold mortgages in portfolio. Community bank acquirers, by contrast, tend to target weaker peers, seeking scale efficiencies.

Does Banking Consolidation Harm Households?

Nonbank Market Power in Leveraged Lending

Nonbank lending through collateralized loan obligations (CLOs) represents a significant share of high-yield corporate debt in the United States. This paper presents evidence that CLO managers accumulate private information about borrowing firms, enabling them to exercise market power in syndicated loan markets. One key finding is that a one-standard-deviation increase in a CLO manager's holdings translates to roughly 15.5 basis points higher borrowing costs for the firm - comparable in magnitude to a full credit rating downgrade. The core argument is that a CLO manager that holds much of a borrower's existing debt has private information and thus has leverage to demand better terms in new syndications.

Nonbank Market Power in Leveraged Lending

Ruffle Feathers: Cyberattacks and Local Bank Runs

This paper explores the effects of bank cyberattacks on depositor behavior and local banking markets, using branch-level data across U.S. counties from 2010 to 2023. The paper documents that a cyberattack typically causes significant deposit outflows from the targeted bank, in excess of those expected based on underlying solvency fundamentals. These deposit outflows are observed to be accompanied by inflows into nearby competitor banks and by tightened lending at the targeted bank. The analysis also finds that deposit withdrawals are amplified in counties with higher urbanization, greater internet access, denser local media, more social media usage, higher uncertainty avoidance, lower social capital and closer geographic proximity to the bank's headquarters. The authors argue that communication and disclosure strategies tailored to local information environments could mitigate these potential liquidity effects.

Ruffle Feathers: Cyberattacks and Local Bank Runs

Big Assumptions, Bigger Impacts: Rethinking Stablecoin Policy Findings - Who Lends to Main Street When the Deposits Leave?

An April 2026 CEA report concluded that the lending impact of stablecoin adoption would likely be small, because most reserves recirculate through the banking system and an ample-reserves regime can absorb the shift. This article critiques the CEA analysis against the backdrop of debate around the CLARITY Act, which would consider allowing wallet providers and exchanges to offer yield or "rewards" on stablecoin balances - potentially accelerating deposit outflows. It argues that the CEA's conclusion rests on assumptions that won't hold up indefinitely, including the stablecoin market will remain relatively small. More widespread migration of deposits into stablecoins - which is apt to occur if stablecoin issuers are permitted to offer rewards on stablecoin balances- would translate into a loss of low-cost core deposits that support lending to small businesses and rural communities. Therefore, this article contends, even if those dollars eventually re-enter the banking system, they would tend to come back in a different form: more wholesale, more rate-sensitive and more costly to hold, less locally based - making them a poor substitute for supporting relationship lending.

Big Assumptions, Bigger Impacts: Rethinking Stablecoin Policy Findings

Cryptoasset Service Providers as Financial Intermediaries: Risks and Policy Approaches

The largest crypto platforms - Binance, Coinbase, OKX and others - now bundle exchange, custody, lending, derivatives, staking, yield accounts and token issuance under one roof. This paper examines how these large crypto platforms - referred to as "multifunction crypto asset intermediaries" (MCIs), have evolved into complex financial intermediaries and argues that regulation hasn't kept pace with the associated risks. It identifies risks and how they are amplified by the volatile nature of crypto assets, interconnectedness among MCIs and links to traditional finance. The authors call for prudential regulation of MCIs engaged in financial intermediation, including capital and liquidity buffers, stress testing and governance requirements.

Cryptoasset Service Providers as Financial Intermediaries: Risks and Policy Approaches

Featured BPI Research

The Fed's New Global Market Shock Methodology: Consistent, Coherent, But Containing One Fatal (But Correctible) Flaw

This blog post critiques the Fed's recently published Global Market Shock (GMS) stress test methodology. The author notes that the underlying econometric framework - using GARCH models for volatility and copulas for correlations - is sophisticated and well-grounded. However, it has a critical flaw: the small number of "primary risk factor shocks" that drive all other outputs are chosen with no objective, empirically grounded constraints. In practice, this means a few discretionary judgments incorporated into the econometric machinery determine the severity of the entire stress test - and by extension, banks' capital requirements. The author demonstrates with a credit spread example that small, arbitrary changes in these primary inputs produce dramatically different outputs, and recommends improvements to the transparency, justification and governance around these primary shock choices.

The Fed's New Global Market Shock Methodology: Consistent, Coherent, But Containing One Fatal (But Correctible) Flaw

Outside Blog Posts and Research Notes of Interest

Stablecoins in 2025: Developments and Financial Stability Implications

Tokenized Finance

Bank Failures: Solvency and Liquidity

The Effect of Size Thresholds on Large Banks under the 2019 Tailoring Framework

What Are Stablecoins Used for Today? Estimating the Distribution of Stablecoins

CFPB Data Point: Debt Burdens among Credit-Linked Consumers in the United States

Conferences & Symposiums

5/7/2026 - 5/8/2026
13th Annual Conference on Financial Market Regulation: Announcement and Call for Papers
The Securities and Exchange Division of Economic and Risk Analysis
Washington, D.C.
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5/14/2026 - 5/15/2026
Mortgage Market Research Conference
Federal Reserve Bank of Philadelphia
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5/18/2026
2026 Research Conference on Banking Regulation
European University Institute and Bank Policy Institute
Florence, Italy
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5/27/2026 - 5/29/2026
Boulder Summer Conference on Consumer Financial Decision Making
University of Colorado, Boulder
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6/22/2026 - 6/23/2026
Fifth Conference on the International Roles of the U.S. Dollar: Announcement and Call for Papers
Federal Reserve Board, Washington, D.C.
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6/25/2026 - 6/26/2026
2026 New York Fed Innovation Conference
Federal Reserve Bank of New York
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9/2/2026 - 9/3/2026
Edinburgh Financial Technology Conference: Announcement and Call for Papers
University of Edinburgh Business School, Edinburgh, Scotland
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9/10/2026 - 9/11/2026
Higher Education Finance Research Conference: Announcement and Call for Papers
Federal Reserve Bank of Philadelphia
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9/24/2026 - 9/25/2026
Inflation Drivers and Dynamics Conference 2026: Announcement and Call for Papers
Federal Reserve Bank of Cleveland
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11/13/2026
NY Fed - ECB Conference on Nonbank Financial Institutions: Announcement and Call for Papers
Federal Reserve Bank of New York
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11/19/2026 - 11/20/2026
International Conference on Payments and Securities Settlement: Announcement and Call for Papers
Deutsche Bundesbank (Conference Center in Eltville, Germany)
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11/24/2026 - 11/25/2026
25th Annual Bank Research Conference: Announcement and Call for Papers
FDIC's Center for Financial Research, Arlington VA
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