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A Peek behind the Curtain of Bank Supervision

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Abstract

Since the financial crisis, bank regulatory and supervisory policies have changed dramatically both in the United States (Dodd-Frank Wall Street Reform and Consumer Protection Act) and abroad (Third Basel Accord). While these shifts have occasioned much debate, the discussion surrounding supervision remains limited because most supervisory activity? both the amount of supervisory attention and the demands for corrective action by supervisors?is confidential. Drawing on our recent staff report ?Parsing the Content of Bank Supervision,? this post provides a peek behind the scenes of bank supervision, presenting a statistical linguistic analysis based on confidential communications from Fed supervisors to the banks they supervise. Our analysis tackles several fundamental questions: What are the precise supervisory issues being raised? What drives the issues supervisors bring up? How does bank supervision relate to the other two pillars of the Basel Accord: capital regulations and market discipline?

Suggested Citation

  • Paul Goldsmith-Pinkham & Beverly Hirtle & David O. Lucca, 2016. "A Peek behind the Curtain of Bank Supervision," Liberty Street Economics 20160414, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87120
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    More about this item

    Keywords

    bank supervision; text analysis; financial stability;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G1 - Financial Economics - - General Financial Markets

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