Small-business lending will suffer under US bank rules

2015 ◽  
Keyword(s):  
Financial Crisis ◽  
Small Business ◽  
Primary Target ◽  
Community Banks ◽  
Small Business Lending ◽  
Wall Street ◽  
Compliance Costs ◽  
Content Type ◽  
Job Growth ◽  
Regional Banks

Significance Community and regional banks were never the primary target of post-financial crisis reforms, but have been affected by the knock-on effects of the 2010 Dodd-Frank Wall Street Reform and Competitiveness Act. Impacts Regulation has an outsize impact on institutions that have a smaller base over which to amortise regulatory and compliance costs. This has major consequences for lending patterns, as smaller community banks are still a significant source of small loans to businesses. Regulatory relief for smaller institutions could free up resources for small business lending, which might stimulate job growth.

Small-business financing after the financial crisis – lessons from the literature

2017 ◽  
Vol 6 (3) ◽  
pp. 315-339 ◽  
Author(s):  
David Wille ◽  
Adam Hoffer ◽  
Stephen Matteo Miller
Keyword(s):  
Financial Crisis ◽  
Small Business ◽  
Financial Services ◽  
Small Firms ◽  
Financial Regulation ◽  
Primary Source ◽  
Recent Analysis ◽  
Small Business Lending ◽  
Content Type ◽  
Business Financing

Purpose The purpose of this paper is to examine the status of small-business lending following the recession. Design/methodology/approach The authors survey the literature and analyze recent surveys of small-business lending. Findings The results reinforce the importance of owner equity as a primary source of small-business financing. In addition, the authors find that small firms have been seeking and obtaining less capital since the 2008 financial crisis. Research limitations/implications The findings about the main sources of small-business financing will be informative when formulating financial regulation. Social implications The available evidence suggests that new regulation of the financial services industry may be restricting access to products that small-business owners rely on and may adversely affect small banks. Originality/value The authors offer the most recent analysis of small-business financing, focusing on changes that may have been caused by the recession and major financial regulations.

Wall Street women: professional saviors of the global economy

2015 ◽  
Vol 11 (2) ◽  
pp. 137-155 ◽  
Author(s):  
Melissa Fisher
Keyword(s):  
Financial Crisis ◽  
Global Economy ◽  
First Generation ◽  
Field Work ◽  
Financial Policy ◽  
Wall Street ◽  
Content Type ◽  
Cultural Power ◽  
The 2008 Financial Crisis ◽  
Practical Implications

Purpose – This paper aims to, by drawing on two decades of field work on Wall Street, explore the recent evolution in the gendering of Wall Street, as well as the potential effects – including the reproduction of financiers’ power – of that evolution. The 2008 financial crisis was depicted in strikingly gendered terms – with many commentators articulating a divide between masculine, greedy, risk-taking behavior and feminine, conservative, risk-averse approaches for healing the crisis. For a time, academics, journalists and women on Wall Street appeared to be in agreement in identifying women’s feminine styles as uniquely suited to lead – even repair – the economic debacle. Design/methodology/approach – The article is based on historical research, in-depth interviews and fieldwork with the first generation of Wall Street women from the 1970s up until 2013. Findings – In this article, it is argued that the preoccupation in feminine styles of leadership in finance primarily reproduces the power of white global financial elites rather than changes the culture of Wall Street or breaks down existent structures of power and inequality. Research limitations/implications – The research focuses primarily on the ways American global financial elites maintain power, and does not examine the ways in which the power of other international elites working in finance is reproduced in a similar or different manner. Practical implications – The findings of the article provide practical implications for understanding the gendering of financial policy making and how that gendering maintains or reproduces the economic system. Social implications – The paper provides an understanding of how the gendered rhertoric of the financial crisis maintains not only the economic power of global financial elites in finance but also their social and cultural power. Originality/value – The paper is based on original, unique, historical ethnographic research on the first generation of women on Wall Street.

Mark-to-market and its effects on community banking during the financial crisis

2015 ◽  
Vol 23 (1) ◽  
pp. 55-72 ◽  
Author(s):  
Hilde Patron ◽  
William J. Smith
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Market Price ◽  
Accounting Standards ◽  
Capital Requirements ◽  
Community Banks ◽  
Content Type ◽  
Share Prices ◽  
Illiquid Markets ◽  
The Impact

Purpose – The purpose of this paper is to study the impact of the relaxation of mark-to-market (MTM) standards on community banks’ share prices. Mark-to-market valuation of securities became increasingly common in the late 1990s and 2000s, as regulators sought to create more transparent and more current depictions of bank financial positions. However, MTM accounting may be sub-optimal in the presence of severe market frictions, such as those experienced during the financial crisis of the late 2000s. To comply with capital requirements associated with MTM accounting, banks of the late 2000s dramatically liquidated portfolios with potentially solvent assets in illiquid markets, taking huge losses. During the financial crisis, mortgage-backed securities held by banks began to plummet in value. Banks were forced to either liquidate these assets even though there were no buyers or dramatically reduce the values of their portfolios based on fire-sale prices. On a cash-flow basis, these securities had value, as many mortgages bundled in these securities continued to be paid on time; however, with markets frozen, market prices did not reflect this value. Design/methodology/approach – This study shows that, for a sample of 134 community banks, share prices increased after the MTM relaxation, even after accounting for a variety of other economic factors. Findings – This paper shows that, perhaps counterintuitively, the steps taken by the Financial Accounting Standards Board to relax MTM accounting standards may have acted as a stabilizing factor on the market price of community bank shares by allowing banks to selectively liquidate assets, boosting asset prices until uncertainty was resolved. Originality/value – This paper examines the impact of recent changes in accounting standards on the perceived risks associated with the banking sector. It specifically focuses attention on the impacts these changes had on community-based banks within the USA.

scholarly journals Treating Apples Like Oranges

2019 ◽  
Vol 6 (2) ◽  
pp. 453-474
Author(s):  
Gregory Butz
Keyword(s):  
Financial Crisis ◽  
Great Recession ◽  
Private Equity ◽  
Business Models ◽  
Small Community ◽  
Community Banks ◽  
Wall Street ◽  
The Great Recession ◽  
Equity Funds ◽  
Volcker Rule

In response to the Financial Crisis of 2008 and the Great Recession that followed, Congress passed the Dodd–Frank Wall Street Reform and Con- sumer Protection Act in 2010. The Volcker Rule is a controversial section of the Dodd–Frank Act that prohibits all banks, no matter their size, from pro- prietary trading and entering into certain relationships with private equity funds. But the Volcker Rule forces banks to incur significant costs to ensure compliance. While Big Banks have the capital and infrastructure to comply with the Volcker Rule, small Community Banks often do not. This gives Big Banks an unfair competitive advantage over Community Banks. However, re- cently there has been renewed interest in the Volcker Rule, particularly regard- ing its effects on Community Banks. Both the legislative and executive branches are calling for changes to the Volcker Rule. But there is no consen- sus on how the Volcker Rule should be changed and what types of financial institutions those changes should affect. This Article will explore this issue. First, this Article will discuss the background of the Financial Crisis, Great Recession of 2008, Dodd–Frank, and the Volcker Rule. Second, this Article differentiates between the business models of Big Banks and Community Banks. Third, this Article examines the Volcker Rule’s effect on Community Banks. Fourth, this Article will consider recent proposals for changes to the Volcker Rule by the House of Representatives, Senate, and the Department of Justice. Finally, this Article will argue that Community Banks should be ex- empted from the Volcker Rule, preferably by a bill recently proposed by the Senate Banking Committee.

scholarly journals Access to bank finance for UK SMEs in the wake of the recent financial crisis

2016 ◽  
Vol 22 (6) ◽  
pp. 903-932 ◽  
Author(s):  
Marc Cowling ◽  
Weixi Liu ◽  
Ning Zhang
Keyword(s):  
Financial Crisis ◽  
Small Business ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Credit Rationing ◽  
Economic Downturn ◽  
Content Type ◽  
External Finance ◽  
Risk Rating ◽  
The Global Financial Crisis

Purpose The purpose of this paper is to investigate how entrepreneurs demand for external finance changed as the economy continued to be mired in its third and fourth years of the global financial crisis (GFC) and whether or not external finance has become more difficult to access as the recession progressed. Design/methodology/approach Using a large-scale survey data on over 30,000 UK small- and medium-sized enterprises between July 2011 and March 2013, the authors estimate a series of conditional probit models to empirically test the determinants of the supply of, and demand for external finance. Findings Older firms and those with a higher risk rating, and a record of financial delinquency, were more likely to have a demand for external finance. The opposite was true for women-led businesses and firms with positive profits. In general finance was more readily available to older firms post-GFC, but banks were very unwilling to advance money to firms with a high-risk rating or a record of any financial delinquency. It is estimated that a maximum of 42,000 smaller firms were denied credit, which was significantly lower than the peak of 119,000 during the financial crisis. Originality/value This paper provides timely evidence that adds to the general understanding of what really happens in the market for small business financing three to five years into an economic downturn and in the early post-GFC period, from both a demand and supply perspective. This will enable the authors to consider what the potential impacts of credit rationing on the small business sector are and also identify areas where government action might be appropriate.

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