Research Exchange: June 2026

Selected Outside Research

The Funding Structure of Direct Lenders

This paper investigates the funding structure of public and private business development companies (BDCs) and related financial fragility issues. The analysis highlights the differing roles of secured bank revolvers, SPV facilities (bank credit lines secured against pledged loan pools), securitized CLO issuance and unsecured notes in funding BDCs. The analysis also highlights how the rapid growth of private credit CLO issuance, whereby BDCs securitize their loan portfolios into rated tranches that are sold to other financial institutions, has increased the interconnectedness between BDCs and other financial markets and institutions.

The Funding Structure of Direct Lenders

Regulatory Thresholds and the Supply of Small Business Credit

The Dodd-Frank Act subjects banking organizations with more than $10 billion in total assets to enhanced regulatory oversight. This paper studies the effects of this stricter regulatory framework on banks' small business lending activities, using data from the SBA 7(a) small business loan program. The study documents a notable change in the size distribution of banks after the implementation of Dodd-Frank, with banks participating in the program bunching just below the $10 billion cutoff. Another key finding is that banks that migrate from just below to just above the $10 billion threshold after its implementation charge higher spreads on newly originated e SBA loans compared to banks remaining just below the threshold. The analysis further demonstrates that the banks that cross the size threshold adjust non-price terms such as loan amount and term-to-maturity.

Regulatory Thresholds and the Supply of Small Business Credit

The Real Effects of Payment Anonymity: Evidence from the Crypto Ecosystem

This paper investigates the causal effect of expanded access to anonymous payment technology - via the rollout of Bitcoin ATMs (BTMs) on crime, drug markets, overdose deaths and household credit across U.S. counties. The analysis demonstrates that BTM entry raises total local crime and illicit activity such as drug dealing, particularly in counties with more lax transactor identification requirements. Also, consumer credit delinquency rates are found to rise (with a lag).

The Real Effects of Payment Anonymity: Evidence from the Crypto Ecosystem

Central Clearing for Government Securities Repos

Recent stress episodes in repo markets in the U.S., U.K. and other jurisdictions have led to efforts to strengthen market resilience, including proposals for increased central clearing with central counterparties (CCPs). This paper outlines the structure of repo markets and how they differ across countries; describes the role of central clearing; and analyzes the potential benefits and risks of central clearing. Potential benefits discussed include improved transparency and price discovery in repo markets; enhanced netting efficiency; advantages of risk management at the CCP level; and more liquid markets with broader participation. An important financial stability concern arising from central clearing is systemic risk tied to reliance on a single CCP or small number of CCPs. An additional risk is that CCP implementation, if not carefully calibrated, may fail to deliver on expected benefits and instead lead to exclusion of participants, thinner markets or higher costs.

Central Clearing for Government Securities Repos

The Fragility of Semi-Liquid Private Credit Funds

This paper examines the stability of semi-liquid private credit funds, which promise investors periodic payouts while holding illiquid loans, such as business development companies (BDCs), that typically offer investors quarterly share repurchases. Despite caps on share repurchases, typically 5 percent of shares outstanding or other redemption limits, the analysis finds multiple elements of fragility. In particular, cash buffers, which average only about 5 percent of total net assets, barely cover one quarter's worth of maximum redemptions. Moreover, inflows and outflows into BDCs negatively co-move, suggesting that funds will find it hardest to raise new capital when facing greater redemption pressure.

The Fragility of Semi-Liquid Private Credit Funds

Effectiveness of Supervisory Activities in Mitigating Banks' Commercial Real Estate Risk

The ECB's Single Supervisory Mechanism (SSM) designated CRE exposure a key supervisory priority for 2022-2024. The SSM deployed two types of supervisory activities: on-site inspections (OSIs) and targeted reviews (TRs). This paper examines the effectiveness of these interventions in prompting banks to increase their CRE-specific coverage ratios - the ratio of loan-loss provisions to non-performing CRE exposures - using confidential quarterly supervisory data for large euro area banks from 2020 to 2024. The analysis finds that OSIs produced large and persistent increases in CRE coverage ratios, which rise beginning in the quarter of the inspection and remain elevated for at least eight quarters. In contrast, TRs produced immediate but short-lived increases in coverage ratios. The authors conclude that the two approaches are complementary: TRs can be implemented quickly on a broad basis for system-wide vulnerability detection and OSIs for deep remediation where risks are most acute.

Effectiveness of Supervisory Activities in Mitigating Banks' Commercial Real Estate Risk

The Anatomy of Stablecoin Transactions

Most stablecoin research treats transfer events as standalone payment transactions - analogous to a bank wire or consumer payment. This paper leverages data from nearly 600 million Ethereum event logs covering three major U.S. dollar stablecoins - Tether, USD Coin and PayPal USD - finds that stablecoin activity is dominated by "transactions," or bundled sequences of operations executed atomically on-chain. Nearly a third of transactions involve additional contract interactions or multiple transfers, potentially spanning dozens of counterparties, hundreds of event logs and multiple smart contract protocols. Also, because complex transactions each emit many transfer events, nearly 60 percent of all transfer events occur within these composite transactions - not as standalone value transfers. A key takeaway is that "analyses that treat transfers as standalone payments therefore risk misclassifying a large share of on-chain stablecoin use, with implications for empirical measurement, market monitoring, and policy."

The Anatomy of Stablecoin Transactions

Featured BPI Research

When the Fed Implemented Policy Using a Demand-Driven Approach

This BPI blog examines the Fed's historical experience, during 1982-1989, with a "demand-driven" monetary policy approach - where the central bank keeps the banking system structurally short of reserves, forcing banks to borrow from a standing facility - to draw lessons for central banks (BoE, ECB, Bank of Canada, RBA) currently adopting similar frameworks. Under this operating regime, referred to as "borrowed-reserves targeting," the FOMC set a target for discount window borrowing. Because borrowing was positively related to the level of the fed funds rate, the approach also defined an implicit target for the fed funds rate. The relationship between borrowing and the funds rate proved unstable over time in part because of variability in banks' reluctance to borrow. Modern demand-driven facilities (BoE, ECB, RBA) may face similar problems.

When the Fed Implemented Policy Using a Demand-Driven Approach

The 2026 GSIB Surcharge Proposal: Halfway Back to the Future?

This note highlights how the Federal Reserve's recent GSIB surcharge proposal would only partially remedy the problem of fixed parameters, which has resulted in surcharges increasing over time due to economic growth.

The 2026 GSIB Surcharge Proposal: Halfway Back to the Future?

Outside Blog Posts and Research Notes of Interest

Regulating DeFi Platforms

The Euro-Area Repo Market: Structure, Participants, and Interlinkages

Mortgage Servicing Right Valuations under Stress

How Much Nonbank Business Lending Is Indirectly Funded by Banks?

Synthetic Stablecoins and Financial Stability

Strengthening the Going-Concern Role of AT1: Options and Tradeoffs

Conferences & Symposiums

9/2/2026 - 9/3/2026
Edinburgh Financial Technology Conference: Announcement and Call for Papers
University of Edinburgh Business School, Edinburgh, Scotland
More Information

9/10/2026 - 9/11/2026
Higher Education Finance Research Conference: Announcement and Call for Papers
Federal Reserve Bank of Philadelphia
More Information

9/13/2026
Workshop on Innovations in Credit Scoring
Federal Reserve Bank of Philadelphia (Virtual)
More Information

9/18/2026 - 9/19/2026
2026 Wharton-Chicago-Harvard Insolvency and Restructuring Conference: Announcement and Call for Papers
University of Pennsylvania, Philadelphia, PA
More Information

9/24/2026 - 9/25/2026
Inflation Drivers and Dynamics Conference 2026: Announcement and Call for Papers
Federal Reserve Bank of Cleveland
More Information

9/24/2026 - 9/25/2026
25th Annual Bank Research Conference: Announcement and Call for Papers
FDIC Center for Financial Research, Arlington, VA
More Information

10/6/2026 - 10/7/2026
2026 Annual Community Banking Research Conference
Federal Reserve Bank of St. Louis
More Information

10/9/2026 - 10/10/2026
2026 Wharton Conference on Liquidity and Financial Fragility
University of Pennsylvania, Philadelphia, PA
More Information

10/29/2026 - 10/30/2026
Sixth Biennial Conference on Auto Lending: Announcement and Call for Papers
Federal Reserve Bank of Philadelphia
More Information

11/5/2026 - 11/6/2026
2026 Federal Reserve Stress Testing Research Conference
Federal Reserve Bank of Boston
More Information

11/13/2026
NY Fed-ECB Conference on Nonbank Financial Institutions: Announcement and Call for Papers
Federal Reserve Bank of New York
More Information

11/19/2026 - 11/20/2026
International Conference on Payments and Securities Settlement: Announcement and Call for Papers
Deutsche Bundesbank (Conference Center in Eltville, Germany)
More Information

11/19/2026 - 11/20/2026
2026 Financial Stability Conference
Federal Reserve Bank of Cleveland
More Information

11/20/2026
Pacific Basin Research Conference: Announcement and Call for Papers
Federal Reserve Bank of San Francisco
More Information

11/24/2026 - 11/25/2026
25th Annual Bank Research Conference: Announcement and Call for Papers
FDIC's Center for Financial Research, Arlington, VA
More Information