[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-seo-393375-105":3,"detail-sidebar-cat-1-en-105":81,"doc-detail-393375-en":127},{"code":4,"msg":5,"data":6},0,"ok",{"site_id":7,"language":8,"slug":9,"title":10,"keywords":11,"description":12,"schema_data":13,"social_meta":74,"head_meta":76,"extra_data":78,"updated_unix":80},105,"en","bank-monitoring-with-on-site-inspections","Bank Monitoring with On-Site Inspections","","Empirical research examines how bank monitoring through on-site inspections affects construction lending decisions and outcomes. Using a proprietary transaction-level database covering nearly 30,000 multiple-draw construction loans, the study estimates determinants and consequences of inspection intensity. Results show monitoring is traded off against favorable origination terms, becomes less frequent when banks have prior borrower relationships, and rises as local economic conditions or bank health deteriorate. Negative inspection reports correlate with higher denial rates for draw requests, and monitoring reduces construction loan default, validating theoretical predictions about monitoring’s role in mitigating risk.",{"@graph":14,"@context":73},[15,34,56],{"@type":16,"itemListElement":17},"BreadcrumbList",[18,23,27,31],{"item":19,"name":20,"@type":21,"position":22},"https://docshare.wps.com","Home","ListItem",1,{"item":24,"name":25,"@type":21,"position":26},"https://docshare.wps.com/template/","Template",2,{"item":28,"name":29,"@type":21,"position":30},"https://docshare.wps.com/template/presentations/","Presentations",3,{"item":32,"name":10,"@type":21,"position":33},"https://docshare.wps.com/template/bank-monitoring-with-on-site-inspections/393375/",4,{"url":32,"name":10,"@type":35,"image":36,"author":41,"headline":10,"publisher":44,"fileFormat":47,"inLanguage":8,"description":12,"dateModified":48,"datePublished":49,"encodingFormat":47,"isAccessibleForFree":50,"interactionStatistic":51},"DigitalDocument",{"url":37,"@type":38,"width":39,"height":40},"https://docshare.wps.com/thumbnails/bank-monitoring-with-on-site-inspections/393375.png","ImageObject",442,249,{"name":42,"@type":43},"Rowan","Person",{"url":19,"name":45,"@type":46},"DocShare","Organization","application/pdf","2026-10-19","2026-09-26",true,{"@type":52,"interactionType":53,"userInteractionCount":55},"InteractionCounter",{"@type":54},"ViewAction",6,{"@type":57,"mainEntity":58},"FAQPage",[59,65,69],{"name":60,"@type":61,"acceptedAnswer":62},"How does prior borrower relationships affect on-site monitoring intensity?","Question",{"text":63,"@type":64},"Monitoring is less frequent when the bank has a prior relationship with the borrower, consistent with information transfer across projects.","Answer",{"name":66,"@type":61,"acceptedAnswer":67},"What is the relationship between inspection reports and draw request decisions?",{"text":68,"@type":64},"Textual analysis indicates that negative inspection reports are associated with a greater likelihood that banks deny draw requests.",{"name":70,"@type":61,"acceptedAnswer":71},"Does increased monitoring influence construction loan default risk?",{"text":72,"@type":64},"Yes. The study provides a comprehensive analysis of construction loan default and finds that monitoring decreases default.","https://schema.org",{"og:url":32,"og:type":75,"og:title":10,"og:site_name":45,"og:description":12},"article",{"robots":77,"canonical":32},"index,follow",{"doc_id":79,"site_id":7},393375,1791726333,{"code":4,"msg":82,"data":83},"success",[84,88,93,98,103,108,113,118,123],{"id":85,"doc_module":22,"doc_module_name":25,"category_name":29,"show_sort_weight":86,"slug":87},11,90,"presentations",{"id":89,"doc_module":22,"doc_module_name":25,"category_name":90,"show_sort_weight":91,"slug":92},12,"Resumes",80,"resumes",{"id":94,"doc_module":22,"doc_module_name":25,"category_name":95,"show_sort_weight":96,"slug":97},14,"Invoices",70,"invoices",{"id":99,"doc_module":22,"doc_module_name":25,"category_name":100,"show_sort_weight":101,"slug":102},15,"Posters",60,"posters",{"id":104,"doc_module":22,"doc_module_name":25,"category_name":105,"show_sort_weight":106,"slug":107},16,"Social Media",50,"social-media",{"id":109,"doc_module":22,"doc_module_name":25,"category_name":110,"show_sort_weight":111,"slug":112},17,"Forms",40,"forms",{"id":114,"doc_module":22,"doc_module_name":25,"category_name":115,"show_sort_weight":116,"slug":117},18,"Letters",30,"letters",{"id":119,"doc_module":22,"doc_module_name":25,"category_name":120,"show_sort_weight":121,"slug":122},21,"Paper Templates",5,"papers-templates",{"id":124,"doc_module":22,"doc_module_name":25,"category_name":125,"show_sort_weight":4,"slug":126},158,"General","general-158",{"code":4,"msg":82,"data":128},{"doc_id":79,"user_id":129,"nickname":42,"user_avatar":130,"doc_module":22,"category_id":85,"category_name":29,"doc_title":10,"doc_description":12,"doc_content":131,"file_id":132,"file_url":133,"file_type":134,"file_size":135,"view_count":55,"is_deleted":4,"is_public":22,"is_downloadable":22,"audit_status":22,"page_count":136,"language":137,"language_code":8,"site_id":7,"html_lang":8,"table_of_contents":138,"faqs":139,"seo_title":140,"seo_description":12,"update_tm":141,"read_time":142},1099514067415,"https://ap-avatar.wpscdn.com/avatar/100002539d78ffe74a7?x-image-process=image/resize,m_fixed,w_180,h_180&k=1779092875211072502","WORKING PAPER SERIES  \nBank Monitoring with On-Site Inspections  \nAmanda Rae Heitz  \nFederal Deposit Insurance Corporation and Tulane University  \nChristopher Martin  \nFederal Deposit Insurance Corporation  \nAlexander Ufier  \nFederal Deposit Insurance Corporation  \nAugust 2022  \nLast Updated: July 2023  \nPreviously circulated as “Bank Monitoring in Construction Lending”  \nFDIC CFR WP 2022-09  \n[fdic.gov/cfr](fdic.gov/cfr)  \nThe Center for Financial Research (CFR) Working Paper Series allows CFR staff and their coauthors to circulate preliminary research findings to stimulate discussion and critical comment. Views and opinions expressed in CFR Working Papers reflect those of the authors and do not necessarily reflect those of the FDIC or the United States. Comments and suggestions are welcome and should be directed to the authors. References should cite this research as a “FDIC CFR Working Paper” and should note that findings and conclusions in working papers may be preliminary and subject to revision.  \nBank Monitoring with On-Site Inspections  \nJuly 20, 2023  \nAmanda Rae Heitz, FDIC and Tulane University, [aheitz@tulane.edu](aheitz@tulane.edu)  \nChristopher Martin, FDIC, [chrmartin@fdic.gov](chrmartin@fdic.gov)  \nAlexander Ufier, FDIC, [aufier@fdic.gov](aufier@fdic.gov)  \nWhile theoretical papers have emphasized the importance of bank loan monitoring, empirical papers have struggled to validate these theories, largely due to limited data availability. Using a proprietary transaction-level database of nearly 30,000 multiple-draw construction loans, we empirically examine the determinants and effects of bank monitoring through on-site inspections. Consistent with theoretical predictions, banks trade off monitoring with favorable origination terms. Monitoring is less frequent when the bank has a prior relationship with the borrower, suggesting information transfers across projects. Monitoring intensity increases when local economic conditions or bank health deteriorate. Textual analysis shows that negative inspection reports are associated with a greater likelihood of banks denying draw requests, indicating that the information collected through monitoring is important for decisionmaking. Finally, we provide a comprehensive analysis of construction loan default and show that monitoring decreases default. Overall, our results validate the predictions of a large theoretical literature emphasizing the important role of bank monitoring.  \nKeywords: bank monitoring, financial crisis, construction loan, failed bank  \nJEL Codes: G21, G51, G01, G33  \nA portion of this paper was completed when Amanda Rae Heitz was a Visiting Scholar with the Federal Deposit Insurance Corporation. Amanda Rae Heitz ([aheitz@tulane.edu](aheitz@tulane.edu), 504-314-7575), Federal Deposit Insurance Corporation and A. B. Freeman School of Business Department of Finance, Tulane University, 7 McAlister Drive, New Orleans, LA, USA 70118; Christopher Martin ([chrmartin@fdic.gov](chrmartin@fdic.gov), 202-898- 3934), Federal Deposit Insurance Corporation, 550 17th St NW, Washington, DC, USA 20429; Alexander Ufier ([aufier@fdic.gov](aufier@fdic.gov), 202-898-6757), Federal Deposit Insurance Corporation, 550 17th St NW, Washington, DC, USA 20429. We are thankful for comments from Rosalind Bennett, Jin Cao (discussant), Lucy Chernykh (discussant), Karyen Chu, Mark Flannery (discussant), Nick Frazier, Ivan Ivanov (discussant), David Javakhadze (discussant), Stephen Karolyi (discussant), Roni Kisin, Yiming Ma (discussant), Jordan Pandolfo, Jon Pogach, Liu Wang (discussant), Smith Williams, Andrew Winton, and seminar participants at the American Economic Association Annual Meeting, Arizona State University Sonoran Winter Finance Conference, South Carolina Fixed Income and Financial Institutions Conference, Community Banking Research Conference, Federal Deposit Insurance Corporation Bank Research Conference, IBEFA Summer Conference, Eastern Finance Association, Financial M","cbCaiiSiUXx0E1Vd","https://ap.wps.com/l/cbCaiiSiUXx0E1Vd","pdf",1016422,55,"English","# Introduction\n## Bank monitoring and loan monitoring theories\n# Data and empirical strategy\n## Construction loan transaction-level data\n# Key findings\n## Trade-offs with origination terms\n## Relationship effects on monitoring\n## Economic conditions and bank health\n## Inspection reports and draw denials\n## Monitoring and default risk\n# Conclusion","[{\"question\":\"How does prior borrower relationships affect on-site monitoring intensity?\",\"answer\":\"Monitoring is less frequent when the bank has a prior relationship with the borrower, consistent with information transfer across projects.\"},{\"question\":\"What is the relationship between inspection reports and draw request decisions?\",\"answer\":\"Textual analysis indicates that negative inspection reports are associated with a greater likelihood that banks deny draw requests.\"},{\"question\":\"Does increased monitoring influence construction loan default risk?\",\"answer\":\"Yes. The study provides a comprehensive analysis of construction loan default and finds that monitoring decreases default.\"}]","Bank Monitoring with On-Site Inspections | PDF",1790385065,19]