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Empirical assessment of SR/CA small-dollar lending letter impact, Accessible Data
Figure 1. Demand and Supply Indicators for Other Consumer Loans
The figure has four panels, two pertaining to demand for and two pertaining to supply of other consumer loans. The first panel plots the personal saving rate, which was at roughly 8 percent since 2017 and then spiked up above 20 percent post-letter issuance and did not return to 8 percent until the end of 2021. The second panel, titled “Net Percent Stronger Demand,” plots banks’ survey responses on their observations around demand for other consumer loans, with a net 40% seeing weaker demand in the period immediately post letter issuance, then reverting to around zero by end 2020. The third and fourth panel, titled “Net Percent Tightening Standards” and “Net Percent Increased Willingness to Lend,” are responses from the same survey on the supply side. They show, on net, banks tightening standards and having a decreased willingness to lend in the other consumer space in the period during and just after the letters were issued.
Note: "Net Percent" refers to the fraction of banks that reported having stronger demand/tightened/increased willingness to lend minus the fraction of banks that reported having weaker demand/loosened/decreased willingness to lend. In all 4 panels is a vertical dashed line marked at 2020Q1. Source: BEA for personal savings rate and SLOOS for lending conditions.
Figure 2. Other Consumer Loans
The figure plots Other Consumer Loan balances and shares of loan portfolios aggregated across all commercial banks from 2016 to 2022. Balances rise from around $200 billion to $325 billion and shares from 2.6% to 3.3% over this time span. The is no notable trend break observed.
Note: “Other Consumer Loans” are loans to individuals for household, family, and other personal expenditures excluding auto loans and credit cards. Student loan balances are removed when reported separately. Loan balance comprises aggregate outstanding other consumer loans balances across all commercial banks, and loan share is this amount divided by total loan balances in all categories at these banks. Vertical dashed line marked at 2020Q1.
Source: Call Reports
Figure 3. Safety and Soundness Exam Rotations
Average growth rates in Other Consumer Loan balances are plotted for each quarter in the two years prior and subsequent to letter issuance in Q1 2020. The averages are plotted separately for banks on their state exam cycle and those on their federal exam cycle at letter issuance, as are 95% confidence intervals for the difference in the series each quarter. The series largely track each other pre-letter. Post-letter, banks on their federal exam cycle exhibit less steep declines in lending than do state exam cycle banks. At year-end 2021, federal exam cycle banks' lending has returned to pre-letter levels while state exam cycle bank lending is down about 6%.
Note: Exam cycle refers to whether in March 2020 a bank had their next routine safety and soundness exam rotation with their federal (FDIC or Fed) or state examiners. Vertical dashed line marked at 2020Q1.
Source: Authors’ calculations using Call Report and Safety and Soundness Examinations data.
Figure 4. CRA Exam Rotations
Line chart plots differences in average growth rates in Other Consumer Loan balances between banks with a CRA exam in the second quarter of 2020 and all other banks are plotted for each quarter in the two years prior and subsequent to letter issuance in Q1 2020, as are 95% confidence intervals for the difference in the series each quarter. The difference is near zero until Q1 2021 when it rises to about 10 percent, though the difference always remains statistically insignificant.
Note: Banks who underwent a CRA exam during the second quarter of 2020, the letter issuance period, are compared to all other banks. Vertical dashed line marked at 2020Q1.
Source: Authors’ calculations using Call Report and Specialty Examinations data.
Figure 5. Impending CRA Exam
Line chart plots Differences in average growth rates in Other Consumer Loan balances between banks with impending CRA exams after letter issuance and those who were examined in 2019 or early 2020 are plotted for each quarter in the two years prior and subsequent to letter issuance in Q1 2020, as are 95% confidence intervals for the difference in the series each quarter. The difference is near zero and then rises to about 3% in the post-letter period, though the difference always remains statistically insignificant.
Note: Banks with impending CRA exams after letter issuance (in late 2020 or 2021) are compared to those who were examined in 2019 or early 2020, just prior to the letter issuances. Banks with CRA exams during the letter issuance period, the second quarter of 2020, are dropped from the sample. Vertical dashed line marked at 2020Q1.
Source: Authors’ calculations using Call Report and Specialty Examinations data.
Figure 6. CRA Rating
Line chart plots average growth rates in Other Consumer Loan balances are plotted for each quarter in the two years prior and subsequent to letter issuance in Q1 2020. The averages are plotted separately for banks with High ratings and those with Satisfactory or Low ratings, as are 95% confidence intervals for the difference in the series each quarter. The series largely track each other pre-letter and immediately post-letter. Beginning at year end 2020, the series begin to diverge, High rating banks’ lending returns to pre-letter levels and then continues to grow, while lower rating banks’ lending remains about 6% below pre-letter levels. By Q2 2022, the difference in lending growth has increased to a statistically significant 15%.
Note: “High” banks have a CRA lending rating of “Outstanding” while “Satisfactory or Low” banks have a rating of “Satisfactory”, “Needs to Improve”, or “Substantial Noncompliance”. Vertical dashed line marked at 2020Q1.
Source: Authors’ calculations using Call Report and Specialty Examinations data
Figure 7. RWA Density
Line chart plots average growth rates in Other Consumer Loan balances are plotted for each quarter in the two years prior and subsequent to letter issuance in Q1 2020. The averages are plotted separately for banks with low RWA density and those with high RWA density, as are 95% confidence intervals for the difference in the series each quarter. Low density banks’ lending is flat pre-letter while high density banks see lending increase about 6%. Post-letter, lending at both types of banks decline in tandem through to Q1 2021, and then begins rebounding. The rebound is faster at high density banks and has surpassed pre-letter levels by Q2 2022 for this group, though the difference with low density banks is not statistically significant.
Note: RWA density is the ratio of risk-weighted assets to total assets. “High density” and “Low density” labels banks at year-end 2019 relative to the median RWA density of 72%. Vertical dashed line marked at 2020Q1.
Source: Authors’ calculations using Call Report data.
Figure 8. Capital Buffers
Line chart plots average growth rates in Other Consumer Loan balances are plotted for each quarter in the two years prior and subsequent to letter issuance in Q1 2020. The averages are plotted separately for banks with high capital buffers and those with low buffers, as are 95% confidence intervals for the difference in the series each quarter. High buffer banks’ lending is flat pre-letter while low buffer banks see lending increase about 6%. Post-letter, lending at high buffer banks declines fairly sharply and remains below pre-letter levels in mid-2022. Lending by low buffer banks declines less sharply post-letter and has increased beyond pre-letter levels by 2022.
Note: “Capital Buffers” measures capital above the most binding requirement at a given bank relative to assets. “Low Buffer” banks are in the lowest quartile by this measure, which corresponds to those with 2.5% of assets or less of an excess capital buffer at the end of 2019. Vertical dashed line marked at 2020Q1.
Source: Authors’ calculations using Call Report data.