There are two opposing hypotheses about the effects of enforcement actions on the cost of bank loans. One hypothesis suggests enforcement actions improve the treatment of borrowers. The other hypothesis suggests enforcement actions worsen the treatment of borrowers. Federal Reserve Bank of Kansas City Economist Raluca Roman recently examined the effects enforcement actions have on loan contracting to determine which hypothesis dominates.

Further Resources

Read "Enforcement Actions and Bank Loan Contracting" by Raluca Roman.

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