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Did U.S. Bank Supervisors Get Tougher During the Credit Crunch? Did They Get Easier During the Banking Boom? Did It Matter to Bank Lending?

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Author Info
Allen N. Berger
Margaret K. Kyle
Joseph M. Scalise

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Abstract

We test three hypotheses regarding changes in supervisory toughness' and their effects on bank lending. The data provide modest support for all three hypotheses that there was an increase in toughness during the credit crunch period (1989-1992), that there was a decline in toughness during the boom period (1993-1998), and that changes in toughness, if they occurred, affected bank lending. However, all of the measured effects are small, with 1% or less of loans receiving harsher or easier classification, about 3% of banks receiving better or worse CAMEL ratings, and bank lending being changed by 1% or less of assets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7689.

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Date of creation: May 2000
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Handle: RePEc:nbr:nberwo:7689

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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  1. Allen N. Berger & Sally M. Davies & Mark J. Flannery, 2000. "Comparing market and supervisory assessments of bank performance: who knows what when?," Proceedings, Federal Reserve Bank of Cleveland, pages 641-670.
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  2. Peek, Joe & Rosengren, Eric, 1995. "Bank regulation and the credit crunch," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 679-692, June. [Downloadable!] (restricted)
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  3. R. Alton Gilbert, 1993. "Implications of annual examinations for the Bank Insurance Fund," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 35-52. [Downloadable!]
  4. Hand, John R M & Holthausen, Robert W & Leftwich, Richard W, 1992. " The Effect of Bond Rating Agency Announcements on Bond and Stock Prices," Journal of Finance, American Finance Association, vol. 47(2), pages 733-52, June. [Downloadable!] (restricted)
  5. John S. Jordan, 1999. "Pricing bank stocks: the contribution of bank examinations," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 39-53. [Downloadable!]
  6. Joe Peek & Eric S. Rosengren, 1993. "Bank Real Estate And The New England Capital Crunch," Boston College Working Papers in Economics 246, Boston College Department of Economics.
  7. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Blackwell Publishing, vol. 51(3), pages 393-414, July. [Downloadable!] (restricted)
  8. Sinkey, Joseph F, Jr, 1978. "Identifying "Problem" Banks: How Do the Banking Authorities Measure a Bank's Risk Exposure?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(2), pages 184-93, May. [Downloadable!] (restricted)
  9. Flannery, Mark J & Houston, Joel F, 1999. "The Value of a Government Monitor for U.S. Banking Firms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 14-34, February.
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  11. Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 273-305, August.
  12. Allen N. Berger & Gregory F. Udell, 1994. "Did risk-based capital allocate bank credit and cause a "credit crunch" in the United States?," Proceedings, Federal Reserve Bank of Cleveland, pages 585-633.
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  13. Peek, Joe & Rosengren, Eric S. & Tootell, Geoffrey M. B., 2003. "Does the federal reserve possess an exploitable informational advantage?," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 817-839, May. [Downloadable!] (restricted)
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  14. Katerina Simons & Stephen Cross, 1991. "Do capital markets predict problems in large commercial banks?," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 51-56.
  15. Joe Peek & Eric S. Rosengren, 1994. "Bank Real Estate Lending and the New England Capital Crunch," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(1), pages 33-58. [Downloadable!] (restricted)
  16. 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. [Downloadable!] (restricted)
  17. Allen N. Berger & Loretta J. Mester, 1999. "What explains the dramatic changes in cost and profit performance of the U.S. banking industry?," Working Papers 99-1, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  18. Hancock, Diana & Wilcox, James A., 1998. "The "credit crunch" and the availability of credit to small business," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 983-1014, August. [Downloadable!] (restricted)
  19. Diana Hancock and James A. Wilcox., 1998. "The "Credit Crunch" and the Availability of Credit to Small Business," Research Program in Finance Working Papers RPF-282, University of California at Berkeley.
  20. Diana Hancock & James A. Wilcox, 1994. "Bank Capital and the Credit Crunch: The Roles of Risk-Weighted and Unweighted Capital Regulations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(1), pages 59-94. [Downloadable!] (restricted)
  21. Allen Berger & Sally Davies, 1998. "The Information Content of Bank Examinations," Journal of Financial Services Research, Springer, vol. 14(2), pages 117-144, October. [Downloadable!] (restricted)
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  22. Holthausen, Robert W. & Leftwich, Richard W., 1986. "The effect of bond rating changes on common stock prices," Journal of Financial Economics, Elsevier, vol. 17(1), pages 57-89, September. [Downloadable!] (restricted)
  23. Robert DeYoung & Mark J. Flannery & William W. Lang & Sorin M. Sorescu, 1998. "Could publication of bank CAMEL ratings improve market discipline?," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 402-421.
  24. Joseph G. Haubrich & Paul Wachtel, 1993. "Capital requirements and shifts in commercial bank portfolios," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 2-15. [Downloadable!]
  25. Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999. "Is Bank Supervision Central To Central Banking?," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 629-653, May. [Downloadable!] (restricted)
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  26. Allen N. Berger & Anil K. Kashyap & Joseph Scalise, 1995. "The Transformation of the U.S. Banking Industry: What a Long, Strange Trip It's Been," Center for Financial Institutions Working Papers 96-06, Wharton School Center for Financial Institutions, University of Pennsylvania.
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  27. Peek, Joe & Rosengren, Eric, 1995. "The Capital Crunch: Neither a Borrower nor a Lender Be," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 625-38, August. [Downloadable!] (restricted)
    Other versions:
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