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How do joint supervisors examine financial institutions? the case of state banks

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  • Marcelo Rezende
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    Abstract

    This paper studies what determines whether federal and state supervisors examine state banks independently or together. The results suggest that supervisors coordinate examinations in order to support states with lower budgets and capabilities and more banks to supervise. I find that states with larger budgets examine more banks independently, that they accommodate changes in the number of banks mostly through the number of examinations with a federal supervisor and that, when examining banks together, state banking departments that have earned quality accreditation are more likely to write conclusion reports separately from federal supervisors. The results also indicate that regulation impacts supervision by changing the characteristics of banks. Independent examinations decrease with branch deregulation, which is consistent with the facts that this reform consolidated banks within fewer independent firms and that state and federal supervisors are more likely to examine large and complex institutions together.

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    File URL: http://www.federalreserve.gov/pubs/feds/2011/201143/201143abs.html
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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2011-43.

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    Date of creation: 2011
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    Handle: RePEc:fip:fedgfe:2011-43

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    Related research

    Keywords: Bank examination - United States ; Bank supervision - United States;

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    1. Yuliya Demyanyk & Charlotte Ostergaard & Bent E. Sørensen, 2007. "U.S. Banking Deregulation, Small Businesses, and Interstate Insurance of Personal Income," Journal of Finance, American Finance Association, vol. 62(6), pages 2763-2801, December.
    2. Holthausen, Cornelia & Rønde, Thomas, 2004. "Cooperation in international banking supervision," Working Paper Series 0316, European Central Bank.
    3. Craig O. Brown & I. Serdar Dinç, 2005. "The Politics of Bank Failures: Evidence from Emerging Markets," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1413-1444, November.
    4. Linda Allen & Julapa Jagtiani & James Moser, 2001. "Further Evidence on the Information Content of Bank Examination Ratings: A Study of BHC-to-FHC Conversion Applications," Journal of Financial Services Research, Springer, vol. 20(2), pages 213-232, October.
    5. Charles Goodhart & Dirk Schoenmaker & Paolo Dasgupta, 2001. "The skill profile of central bankers and supervisors," LSE Research Online Documents on Economics 25052, London School of Economics and Political Science, LSE Library.
    6. Charles M. Kahn & João A. C. Santos, 2001. "Allocating bank regulatory powers: lender of last resort, deposit insurance and supervision," BIS Working Papers 102, Bank for International Settlements.
    7. Edward J. Kane & Rosalind Bennett & Robert Oshinsky, 2008. "Evidence of Improved Monitoring and Insolvency Resolution after FDICIA," NBER Working Papers 14576, National Bureau of Economic Research, Inc.
    8. Edward J. Kane, 2006. "Confronting divergent interests in cross-country regulatory arrangements," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 12p., June.
    9. Beverly J. Hirtle & Jose A. Lopez, 1999. "Supervisory information and the frequency of bank examinations," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 1-20.
    10. Dell'Ariccia, Giovanni & Marquez, Robert, 2006. "Competition among regulators and credit market integration," Journal of Financial Economics, Elsevier, vol. 79(2), pages 401-430, February.
    11. Eisenbeis, Robert A. & Kaufman, George G., 2008. "Cross-border banking and financial stability in the EU," Journal of Financial Stability, Elsevier, vol. 4(3), pages 168-204, September.
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