Incentives and Consolidation: The Case of Commercial Bank Mergers
and the Community Reinvestment Act
||Raphael Bostic, Hamid Mehran, Anna Paulson,
||Working Papers (May
|| Federal Reserve Bank
||The authors look at HMDA Data,
the National Information Center, and Call Reports from 1990 to 1995
to determine whether banks strategically prepare for the regulatory
and public scrutiny associated with a merger or acquisition by increasing
lending to low- and moderate-income individuals.
||"The higher the
percentage of an institution's mortgage originations in a given year
that are directed to low- and moderate-income individuals or neighborhoods,
the greater the probability that the institution will acquire another
bank in the following year."
|"This correlation is due to
banks' anticipation of the public and regulatory scrutiny associated
with the merger review process."
|The relationship is observed for
acquiring banks (which are the subject of scrutiny) but not for acquired
|The effect on lending to low- and
moderate-income individuals or neighborhoods is largest for big banks.
|Number of pages: