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Bank Regulatory Agreements and Real Estate Lending

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  • Joe Peek
  • Eric S. Rosengren

Abstract

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 direct actions taken by bank regulators. We find that banks with low capital ratios reduce their real estate lending substantially more after formal regulatory actions have been initiated by regulators. Furthermore, this reduction in lending is particularly large for the categories of real estate borrowers most likely to be bank dependent.

Suggested Citation

  • Joe Peek & Eric S. Rosengren, 1996. "Bank Regulatory Agreements and Real Estate Lending," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(1), pages 55-73, March.
    • Handle: RePEc:bla:reesec:v:24:y:1996:i:1:p:55-73
    DOI: 10.1111/1540-6229.00680
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    References listed on IDEAS

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    1. Peek, Joe & Rosengren, Eric, 1995. "Bank regulation and the credit crunch," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 679-692, June.
    2. Joe Peek & Eric S. Rosengren, 1994. "Bank Real Estate Lending and the New England Capital Crunch," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(1), pages 33-58, March.
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    6. Peek, Joe & Rosengren, Eric, 1995. "The Capital Crunch: Neither a Borrower nor a Lender Be," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 625-638, August.
    7. Joe Peek & Eric Rosengren, 1995. "Banks and the availability of small business loans," Working Papers 95-1, Federal Reserve Bank of Boston.
    8. Joe Peek & Eric Rosengren, 1992. "The capital crunch in New England," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 21-31.
    9. Jones, David S. & King, Kathleen Kuester, 1995. "The implementation of prompt corrective action: An assessment," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 491-510, June.
    10. Diana Hancock & James A. Wilcox, 1992. "The effect on bank assets of business conditions and capital shortfalls," Proceedings 373, Federal Reserve Bank of Chicago.
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    1. Guizani, Brahim, 2010. "Regulation Policy And Credit Crunch: Evidence From Japan," MPRA Paper 46827, University Library of Munich, Germany, revised 08 May 2013.
    2. Gilbert, R. Alton & Vaughan, Mark D., 2001. "Do depositors care about enforcement actions?," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 283-311.
    3. John Pereira & Irma Malafronte & Ghulam Sorwar & Mohamed Nurullah, 2019. "Enforcement Actions, Market Movement and Depositors’ Reaction: Evidence from the US Banking System," Journal of Financial Services Research, Springer;Western Finance Association, vol. 55(2), pages 143-165, June.
    4. Geoffrey M. B. Tootell, 1996. "Can studies of application denials and mortgage defaults uncover taste-based discrimination?," Working Papers 96-10, Federal Reserve Bank of Boston.
    5. Mark J. Garmaise & Tobias J. Moskowitz, 2004. "Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition," NBER Working Papers 11006, National Bureau of Economic Research, Inc.
    6. Iwatsubo, Kentaro, 2007. "Bank capital shocks and portfolio risk: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 19(2), pages 166-186, March.
    7. António Miguel Martins & Ana Paula Serra, 2012. "Real Estate Market Risk in Bank Stock Returns: Evidence for 15 European Countries," CEF.UP Working Papers 1203, Universidade do Porto, Faculdade de Economia do Porto.
    8. David Martinez-Miera & Rafael Repullo, 2019. "Monetary Policy, Macroprudential Policy, and Financial Stability," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 809-832, August.
    9. Lucia Gibilaro & Gianluca Mattarocci, 2016. "Are Real Estate Banks More Affected by Real Estate Market Dynamics?," International Real Estate Review, Global Social Science Institute, vol. 19(2), pages 151-170.
    10. Simona Malovana, 2018. "The Pro-Cyclicality of Risk Weights for Credit Exposures in the Czech Republic," Working Papers 2018/12, Czech National Bank.
    11. Eduardo Minuci & Scott Schuh, 2022. "Are West Virginia Banks Unique?," Working Papers 22-03, Department of Economics, West Virginia University.
    12. Brahim Guizani, 2015. "Capital requirements, banking supervision and lending behavior: evidence from Tunisia," Middle East Development Journal, Taylor & Francis Journals, vol. 7(2), pages 175-194, July.
    13. Caprio, Gerard Jr. & Honohan, Patrick, 2002. "Banking policy and macroeconomic stability - an exploration," Policy Research Working Paper Series 2856, The World Bank.
    14. Papadimitri, Panagiota & Staikouras, Panagiotis & Travlos, Nickolaos G. & Tsoumas, Chris, 2019. "Punished banks' acquisitions: Evidence from the U.S. banking industry," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 744-764.
    15. John Gallemore, 2023. "Bank financial reporting opacity and regulatory intervention," Review of Accounting Studies, Springer, vol. 28(3), pages 1765-1810, September.
    16. Brent W. Ambrose & Joe Peek, 2008. "Credit Availability and the Structure of the Homebuilding Industry," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 659-692, December.
    17. Chiuling Lu & Raymond So, 2005. "Return Relationships between Listed Banks and Real Estate Firms: Evidence from Seven Asian Economies," The Journal of Real Estate Finance and Economics, Springer, vol. 31(2), pages 189-206, September.
    18. R. Alton Gilbert & Gregory E. Sierra, 2002. "Financial condition of community banks," Supervisory Policy Analysis Working Papers 2002-07, Federal Reserve Bank of St. Louis.
    19. Avezum, Lucas & Huizinga, Harry & Raes, Louis, 2022. "The impact of bank regulation on firms’ capital structure: Evidence from multinationals," Journal of Banking & Finance, Elsevier, vol. 138(C).

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