Research

This paper examines whether consumer complaint narratives contain early information about bank deposit fragility. Using the CFPB Consumer Complaint Database matched to FDIC bank financial data, I construct a transparent text-based measure of trust-loss intensity that captures complaint language about frozen funds, account access, payment reliability, fraud-related missing money, and other failures in depositor-facing services. I find that trust-loss complaint language predicts weaker future deposit growth beyond complaint counts and standard bank characteristics. A one-standard-deviation increase in trust-loss intensity predicts 0.67 percentage points lower deposit growth in the next quarter. The relation is stronger for banks with thinner liquidity buffers, greater deposit dependence, more loan-intensive balance sheets, and fragile banks during the 2023 banking-stress period. The mechanism is most visible in frozen-funds complaints, where operational failures directly interfere with consumers’ access to money. Public enforcement shocks, operating-capacity tests, retail deposit pricing responses, local deposit-market evidence, and nonbank payment-provider complaints all support the interpretation that complaint narratives reveal deterioration in depositor-facing trust before it is fully reflected in regulatory deposit data. Overall, the evidence suggests that public complaint text provides a high-frequency liability-side signal of bank funding fragility.

This paper examines how the Community Bank Leverage Ratio (CBLR) affects the behavior of small U.S. community banks. By allowing eligible banks to replace risk-weighted capital requirements with a simple leverage-based constraint, the CBLR removes the regulatory price of risk while tightening the link between capital requirements and total assets. Using a difference-in-differences design with propensity score matching, I find that CBLR adoption increases Tier 1 leverage ratios primarily through asset contraction rather than equity growth. Banks largely preserve lending, but take on greater risk, as reflected in higher nonperforming loans and charge-offs. They also adjust along the pricing margin by charging higher loan rates and offering lower deposit rates. At the local level, adoption is associated with changes in the volume and composition of CRA and small business lending. Despite its stated purpose, however, CBLR does not appear to reduce regulatory costs. Overall, the evidence suggests that simplifying capital regulation weakens risk sensitivity and induces riskier behavior without delivering measurable efficiency gains.

We investigate how traditional banks react to a shock in high-skilled labor mobility that induces more labor turnover, raises the bargaining power of skilled labor, and translates into higher costs for the banks. Using the natural experiment of the U.S. state courts’ staggered rejections of the Inevitable Disclosure Doctrine (IDD), we document that the rejections of IDD increase labor mobility and wages of skilled workers, which translates to a higher operating cost and lower operating efficiency for traditional banks. This induces banks to increase the loan rates and selectively loan offering without impacting their riskiness. The impact of employee labor mobility on loan rates is more prominent among the banks whose clients have fewer outside options, banks with stronger bargaining power, and banks with a higher likelihood of employee turnover. Neither banks nor customers do seem to enjoy the benefit of such mobility, and the rent of high skilled labor is appropriated by the employees through higher salaries. This has important normative implications for the regulator.