Small Business Lending and Regulation for Small Banks

Srivastav, A.; Vallascas, F.

Abstract

Since May 2015 several U.S. Bank Holding Companies (BHCs) have been newly classified as small banks by regulators, thus benefiting from a friendlier regulatory capital environment. Using a difference-in-differences setting, we show that less regulation on small BHCs boosts small business lending of the affiliated commercial banks. We employ various tests to demonstrate that these findings are attributable to a capital channel where increases in lending are driven by the preferential capital treatment granted to the small BHC. The regulatory capital relief also has some positive effects for the local economy. Overall, the effects of the regulatory capital relief for small BHCs are consistent with its desired policy objectives.

Citation

Srivastav, A., & Vallascas, F. (2022). Small Business Lending and Regulation for Small Banks. Management Science, 68(10), 7742-7760. https://doi.org/10.1287/mnsc.2021.4176

• Journal Article Type: Article
• Acceptance Date: Jul 12, 2021
• Online Publication Date: Dec 15, 2021
• Publication Date: 2022-10
• Deposit Date: Jul 19, 2021
• Publicly Available Date: Jul 19, 2021
• Journal: Management Science
• Print ISSN: 0025-1909
• Electronic ISSN: 1526-5501
• Publisher: Institute for Operations Research and Management Sciences
• Peer Reviewed: Peer Reviewed
• Volume: 68
• Issue: 10
• Pages: 7742-7760
• DOI: https://doi.org/10.1287/mnsc.2021.4176
• Public URL: https://durham-repository.worktribe.com/output/1244991