We use data from TransUnion, a large U.S. credit bureau covering millions of individual consumer loans, to examine the transition to the Current Expected Credit Loss (CECL) accounting standard and to provide novel evidence about the impact that raising reserve requirements has on banks’ pricing and lending decisions in the U.S. consumer lending market. We find that greater reserve requirements following the adoption of CECL induce a statistically significant but economically moderate increase in loan interest rates. The effects are more pronounced for weakly-capitalized banks and even more so for underprivileged individuals borrowing from weakly-capitalized banks. Our evidence informs the ongoing policy debate between standard setters and members of the financial industry about the potential effects of CECL on credit markets.

We exploit proprietary information on severed correspondent banking relationships (due to the stricter enforcement of financial crime regulation) to assess how payment disruptions impede cross-border trade. Using firm-level export data from emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate borrowers start to export less. This trade decline occurs on both the extensive and intensive margins, and firms only partially substitute these foregone exports with higher domestic sales. As a result, total firm revenues and employment shrink. These findings highlight an often overlooked function of global banks: providing the payment infrastructure and trade finance that enables firms in less-developed

countries to export to richer parts of the world.

Banks in the euro area must inform supervisors about each exposure that exceed 10% of the bank’s capital. Using a granular dataset that combines banks’ loan and security portfolios, we test whether banks pass on the cost of complying with the large-exposure framework to borrowers above the threshold.

We show that after a decrease in the reporting threshold, small banks react by shifting more exposures just below the threshold. In addition, banks charge a sizable 74 basis point interest rate premium for large exposures, relative to firms just below the threshold. This premium is more pronounced for small banks and unrated borrowers with fewer banking relationships and hence fewer outside options. In response, when firms approach their bank’s large exposure threshold, they become more likely to borrow from other banks.

Despite the “large-exposure penalty”, we find no statistical evidence for bunching below the threshold, suggesting that there are substantial frictions that prevent firms from switching to better-capitalized banks to reduce interest expenses.