Deposit Insurance and Credit Union Lending

31 Pages Posted: 20 Apr 2021 Last revised: 1 Sep 2021

See all articles by Linh Nguyen

Linh Nguyen

University of St. Andrews

John O. S. Wilson

University of St. Andrews

Tuan Le

affiliation not provided to SSRN

Hiep Luu

University of St. Andrews

Xuan Vinh Vo

University of Economics Ho Chi Minh City; French-Vietnamese Center for Management Education (CFVG) in Ho Chi Minh City

Tram-Anh Nguyen

affiliation not provided to SSRN

Date Written: March 31, 2021

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.

Keywords: Deposit Insurance, Lending, Loan Quality, Credit Unions, Emergency Economic Stabilization Act

JEL Classification: G21; G28

Suggested Citation

Nguyen, Linh and Wilson, John O. S. and Le, Tuan and Luu, Hiep and Vo, Xuan Vinh and Nguyen, Tram-Anh, Deposit Insurance and Credit Union Lending (March 31, 2021). Available at SSRN: https://ssrn.com/abstract=3821558 or http://dx.doi.org/10.2139/ssrn.3821558

Linh Nguyen (Contact Author)

University of St. Andrews ( email )

The Gateway
North Haugh
St Andrews, Fife KY16 9RJ
United Kingdom

John O. S. Wilson

University of St. Andrews ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

Tuan Le

affiliation not provided to SSRN

Hiep Luu

University of St. Andrews ( email )

The Gateway, North Haugh, St Andrews
St Andrews, Fife KY16 9SS
Great Britain

Xuan Vinh Vo

University of Economics Ho Chi Minh City ( email )

Ho Chi Minh City, Ho Chi Minh City
Vietnam

HOME PAGE: http://www.ueh.edu.vn

French-Vietnamese Center for Management Education (CFVG) in Ho Chi Minh City

91 Ba Thang Hai Street
District 10
Ho Chi Minh City
Vietnam

Tram-Anh Nguyen

affiliation not provided to SSRN

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