Nothing Required: U.S. Bank Lending after the End of Reserve Requirements

Abstract

In March 2020, the Federal Reserve eliminated reserve requirements to support lending. Did banks respond by lending more? To answer this question, I use pre-policy differences in reserve burdens to compare banks more and less exposed to the policy change.

Banks facing larger pre-policy requirements increased loan balances more after the policy change. Across four specifications, the estimates range from $0.86 to $1.02 of additional non-PPP loans over four quarters for each dollar of pre-policy reserve burden. The difference is concentrated in the initial adjustment; I find no evidence of persistently faster loan growth. The estimate survives balance-sheet controls and adjustment for local pandemic conditions.

Citation

Pusateri, Nicholas R. 2026. “Nothing Required: U.S. Bank Lending after the End of Reserve Requirements.” Working Paper. URL: https://nicpusateri.com/nothing-required.

@article{pusateri2026nothingrequired,
  title={Nothing Required: U.S. Bank Lending after the End of Reserve Requirements},
  author={Pusateri, Nicholas R.},
  journal={Working Paper},
  year={2026},
  url={https://nicpusateri.com/nothing-required},
  }