THE IMPACT OF FHLB ADVANCES ON BANK HOLDING COMPANY LENDING OVER THE CREDIT CYCLE

Elijah Brewer, William E. Jackson and Thomas S. Mondschean

Journal of Financial Research, 2018, vol. 41, issue 4, 415-443

Abstract: We examine the sensitivity of bank holding company loan growth to the growth in funding obtained through the Federal Home Loan Bank (FHLB) advances program. FHLB advances are a low‐cost funding source that banking organizations may substitute for funds drawn out of the financial system during periods of tight monetary policy or financial stress. This may be especially relevant for community banking organizations that have relatively less access to wholesale funding sources. Our findings show that FHLB advances provide banking organizations with some liquidity protection that reduces the impact of financial market distress and tight monetary policy on loan growth.

Date: 2018
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https://doi.org/10.1111/jfir.12162

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:41:y:2018:i:4:p:415-443

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