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The Effects of Bank Charter Switching on Supervisory Ratings

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Abstract

I study whether commercial banks can improve their supervisory ratings by switching charters. I use the fees charged by chartering authorities to establish a causal effect from switching on ratings. Banks receive more favorable ratings after they change charters, an effect that is large for both national and state charters. In addition, controlling for bank ratings, banks that switch charters fail more often than others. These results suggest that banks can arbitrage ratings by switching charters and are consistent with regulators competing for banks by rating incoming banks better than similar banks that they already supervise.

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  • Marcelo Rezende, 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.).
    • Handle: RePEc:fip:fedgfe:2014-20
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    Cited by:

    1. Sirio Aramonte & Frank Packer, 2022. "Information governance in sustainable finance," BIS Papers, Bank for International Settlements, number 132.
    2. Yang, Ling, 2016. "Is Bank Supervision Effective? Evidence from the Allowance for Loan and Lease Losses," MPRA Paper 75761, University Library of Munich, Germany.

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    Keywords

    bank charters; bank regulators; banking supervision; ratings;
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