Between a rock and a hard place: the CRA-safety and soundness pinch
AbstractA statistical model of regulatory exam ratings provides evidence of conflict between Community Reinvestment Act (CRA) objectives, on one side, and safety and soundness standards, on the other. In his analysis of supervisory goals, Jeff Gunther finds that concentrating bank assets in loans and managing capital at relatively low levels tend to help CRA ratings while hurting CAMEL ratings. Also, banks with financial problems are more likely to receive substandard CRA ratings, even though a shift in resources away from CRA objectives may be necessary to facilitate financial recovery. These findings point to a supervisory process in pursuit of conflicting goals and highlight underappreciated costs of the CRA.
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Bibliographic InfoArticle provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.
Volume (Year): (1999)
Issue (Month): Q II ()
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- Griffith L. Garwood & Dolores S. Smith, 1993. "The Community Reinvestment Act: evolution and current issues," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 251-267.
- Rebel Cole & Jeffery Gunther, 1998. "Predicting Bank Failures: A Comparison of On- and Off-Site Monitoring Systems," Journal of Financial Services Research, Springer, vol. 13(2), pages 103-117, April.
- Jeffrey M. Lacker, 1995. "Neighborhoods and banking," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 13-38.
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