2019's "Most Significant Contribution to Banking Policy" Paper Announced

The conference committee is pleased to announce the selection of “Who’s Holding the Bag? Regulatory Compliance Pressure and Bank Risk-Shifting” by Lamont Black of DePaul University and John Hackney of the University of South Carolina as the paper that made the “most significant contribution to banking policy” at the 2019 Community Banking in the 21st Century research and policy conference. The conference, sponsored by the Federal Reserve, the Conference of State Bank Supervisors and the FDIC, was held Oct. 1-2, 2019 at the Federal Reserve Bank of St. Louis.

In the paper, Black and Hackney find evidence that compliance pressures from the Community Reinvestment Act (CRA) lead to an increase in small business lending by small banks but not by large banks. Specifically, small banks increase origination volumes of their smallest business loans by 19% during CRA exam years. While more CRA-induced lending leads to a short-term increase in employment for local small businesses, it also results in a long-term decrease in employment as the increased risk of the loans made in CRA exam years is realized.

Black is an assistant professor of finance at DePaul University's Driehaus College of Business in Chicago, Illinois. Hackney is an assistant professor of finance at the University of South Carolina's Darla Moore School of Business in Columbia, South Carolina. 

View a video of the presentation of the paper during the conference.