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Strong Wills, Strong Outcomes? Bank Resolvability and Credit Supply

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  • Erten, Irem
  • Ongena, Steven

Abstract

This paper investigates the role of resolvability as a new regulatory constraint for restricting bank behaviour. Using a regression-discontinuity design, we exploit the 2019 regulatory shock that made banks with assets below the $250 billion asset threshold exempt to mandatory resolution-planning (living will) requirements. We find that affected banks experience an increase in their profitability and their complexity. They also lend more and at more favorable terms. Credit granting is boosted especially in less resolvable loans with no covenant restrictions and in countries with poor creditor rights. Our findings suggest that by enforcing crisis plans, resolution requirements may contract credit supply.

Suggested Citation

  • Erten, Irem & Ongena, Steven, 2026. "Strong Wills, Strong Outcomes? Bank Resolvability and Credit Supply," CEPR Discussion Papers 21835, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21835
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    File URL: https://cepr.org/publications/DP21835
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    Keywords

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    JEL classification:

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

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