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Deposit insurance and credit union lending

Author

Listed:
  • Nguyen, Linh H.
  • Wilson, John O.S.
  • Le, Tuan Q.
  • Luu, Hiep N.
  • Nguyen, Tram-Anh
  • Vo, Vinh X.

Abstract

We exploit an exogenous change in the coverage of insured deposits following the passage of the Emergency Economic Stabilization Act (2008) to investigate the impact of deposit insurance on the volume, composition and quality of credit union lending. Using a difference-in-difference approach, we find changes in the volume, composition and riskiness of credit union lending. Specifically, we find that affected credit unions increase total and unsecured lending, leading to a decline in loan quality. Overall, our results suggest that an increase in the maximum coverage of insured deposits induces credit unions to lend more at the expense of loan quality.

Suggested Citation

  • Nguyen, Linh H. & Wilson, John O.S. & Le, Tuan Q. & Luu, Hiep N. & Nguyen, Tram-Anh & Vo, Vinh X., 2022. "Deposit insurance and credit union lending," Journal of Financial Stability, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:finsta:v:60:y:2022:i:c:s1572308922000316
    DOI: 10.1016/j.jfs.2022.101003
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    More about this item

    Keywords

    Deposit insurance; Lending; Loan quality; Credit unions; Emergency Economic Stabilization Act;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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