Those brutal "stress tests" for big banks actually helped local businesses and families grow way faster.
SSRN · March 18, 2026 · 6429623
The Takeaway
Critics often argue that banking regulations act as a 'growth penalty' by restricting the supply of credit to Main Street. However, this study found that by forcing banks to strengthen their balance sheets, these regulations actually made the banking system more stable and effective at supporting local economic growth and business investment.
From the abstract
The most consequential critique of post-crisis stress testing, that supervisory capital constraints depress credit supply and local growth, is not supported by the data. I evaluate this growth-penalty hypothesis using U.S. CCAR and a county-level exposure measure that traces holding-company regulation through subsidiary ownership chains and branch deposit networks, where cross-county variation is largely predetermined by slow-moving banking geography rather than local conditions. Local