TROUGH TO PEAK: A NOTE ON RISK-TAKING IN THE PACIFIC NORTHWEST'S BANKING SECTOR, 2001–2007

Authors

  • GRANT D. FORSYTH

    1. Forsyth: Professor of Economics, Department of Economics, Eastern Washington University, Cheney, WA 99004. Phone 1-509-359-6517, Fax 1-509-359-6983, E-mail gforsyth@ewu.edu
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    • I am grateful for the comments provided by Eric Hake, two anonymous referees, and the participants in the Risk and Crisis session at the 2010 Western Economic Association Meetings in Portland, Oregon. All remaining errors are my own.


Abstract

Using a cohort of 157 Federal Deposit Insurance Corporation insured banks based in the Pacific Northwest, this paper examines regional bank risk-taking over the 2001–2007 economic expansion. The focus is on on-balance sheet assets that carry a 100% risk weighting in the calculation of regulatory capital ratios. This study finds that Pacific Northwest banks significantly increased their share of 100% risk-weighted assets between 2001 and 2007, largely through commercial real estate lending. Asset size, market concentration, age, metropolitan statistical area-location, and balance sheet capacity for risk-taking are statistically significant predictors of the change in the share of 100% risk-weighted assets over the period of interest. (JEL G21, R11)

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