Most Significant Contribution for Banking Research Paper for 2020 Announced

The conference committee is pleased to announce the selection of “Shared Destinies? Small Banks and Small Business Consolidation” as the paper that made the “most significant contribution to banking research” at the 2020 Community Banking in the 21st Century research and policy conference.  

The authors of the winning paper are Claire Brennecke, economist, Consumer Financial Protection Bureau, Stefan Jacewitz, chief of the Quantitative Risk Analysis Section of the Federal Deposit Insurance Corp. (FDIC) and Jonathan Pogach, chief of the FDIC’s Financial Modeling and Research Section. 

The conference, sponsored by the Federal Reserve, the Conference of State Bank Supervisors (CSBS) and the FDIC, was held virtually Sept. 30-Oct. 1, 2020. 

Here is a summary of their paper from the 2020 Conference Volume

“The paper investigates whether changes in the composition of businesses affect the composition of the banking industry. It finds that small-firm employment is positively associated with small bank deposits, income and small business lending, but not associated with large-bank balance sheets and income. The authors link their results to the propensity of small banks to be acquired. The findings are consistent with a view that, in the absence of small-business financial service demand, a large bank business model based on economies of scale may be more profitable than a small-bank business model based on comparative advantages in relationship lending. While many existing policies seek to support small businesses through the support of small banks, the authors’ results suggest supporting small businesses could be a potential mechanism for supporting small banks.” 

Read a PDF of "Shared Destinies? Small Banks and Small Business Consolidation," or watch Pogach’s presentation of his team’s paper during Research Session 1 from this year’s virtual conference. The Session 1 moderator was Elena Loutskina, professor of business administration and the Peter M. Grant II Bicentennial Foundation Chair in Business Administration with the Darden School of Business, University of Virginia. The community bank discussant was Mike Butler, president and CEO of Radius Bank, Boston, Massachusetts.