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Is Three a Crowd? Competition among Regulators in Banking

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  • Rosen, Richard J

Abstract

Banks are able to switch among three options for a primary federal regulator: the FDIC, the Federal Reserve, and the OCC. We examine why they switch and what the results of switches are. We find support for the hypothesis that competition among regulators has beneficial aspects. Regulators seem to specialize in offering banks that are changing strategy the ability to improve performance by switching regulators. There is also evidence that the ability to switch regulators allows banks to get away from bank examiners who desire a quiet life, that is, examiners who attempt to minimize the effort they spend on work.

Suggested Citation

  • Rosen, Richard J, 2003. " Is Three a Crowd? Competition among Regulators in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 967-998, December.
  • Handle: RePEc:mcb:jmoncb:v:35:y:2003:i:6:p:967-98
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    Cited by:

    1. Rezende, Marcelo, 2014. "The Effects of Bank Charter Switching on Supervisory Ratings," Finance and Economics Discussion Series 2014-20, Board of Governors of the Federal Reserve System (U.S.).
    2. Itai Agur, 2009. "Regulatory Competition and Bank Risk Taking," DNB Working Papers 213, Netherlands Central Bank, Research Department.
    3. Sumit Agarwal & David Lucca & Amit Seru & Francesco Trebbi, 2014. "Inconsistent Regulators: Evidence from Banking," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 889-938.
    4. Feng, Guohua & Zhang, Xiaohui, 2012. "Productivity and efficiency at large and community banks in the US: A Bayesian true random effects stochastic distance frontier analysis," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 1883-1895.
    5. Agur, Itai, 2013. "Multiple bank regulators and risk taking," Journal of Financial Stability, Elsevier, vol. 9(3), pages 259-268.
    6. Richard J. Rosen, 2005. "Switching primary federal regulators: is it beneficial for U.S. banks?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 16-23.
    7. Adams, Renee B. & Santos, Joao A.C., 2006. "Identifying the effect of managerial control on firm performance," Journal of Accounting and Economics, Elsevier, vol. 41(1-2), pages 55-85, April.
    8. Nilufer Ozdemir, 2016. "Implications of the Dual Banking System in the US," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(1), pages 91-103, March.
    9. Demyanyk, Yuliya & Loutskina, Elena, 2016. "Mortgage companies and regulatory arbitrage," Journal of Financial Economics, Elsevier, vol. 122(2), pages 328-351.
    10. Itai Agur & Sunil Sharma, 2013. "Rules, Discretion, and Macro-Prudential Policy," IMF Working Papers 13/65, International Monetary Fund.
    11. International Monetary Fund, 2006. "Regulatory Capture in Banking," IMF Working Papers 06/34, International Monetary Fund.
    12. repec:kap:jproda:v:48:y:2017:i:2:d:10.1007_s11123-017-0515-5 is not listed on IDEAS
    13. Hans Degryse & Sanja Jakovljević & Steven Ongena, 2015. "A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 423-443, December.
    14. repec:kap:copoec:v:28:y:2017:i:3:d:10.1007_s10602-016-9223-9 is not listed on IDEAS
    15. Martin Cihak & Jörg Decressin, 2007. "The Case for a European Banking Charter," IMF Working Papers 07/173, International Monetary Fund.

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