Strong Wills, Strong Outcomes? Bank Resolvability and Credit Supply

Irem Erten and Steven Ongena

No 21835, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Living; wills (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2026-08
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