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The impact of supervision on bank performance

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Abstract

We explore the impact of supervision on the riskiness, profitability, and growth of U.S. banks. Using data on supervisors? time use, we demonstrate that the top-ranked banks by size within a supervisory district receive more attention from supervisors, even after controlling for size, complexity, risk, and other characteristics. Using a matched sample approach, we find that these top-ranked banks that receive more supervisory attention hold less risky loan portfolios and are less volatile and less sensitive to industry downturns, but do not have slower growth or profitability. Our results underscore the distinct role of supervision in mitigating banking sector risk.

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  • Beverly Hirtle & Anna Kovner & Matthew Plosser, 2016. "The impact of supervision on bank performance," Staff Reports 768, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:768
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    More about this item

    Keywords

    bank supervision; bank regulation; bank performance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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