How Do Joint Supervisors Examine Financial Institutions? The Case of State Banks

43 Pages Posted: 2 Dec 2009 Last revised: 14 Mar 2010

See all articles by Marcelo Rezende

Marcelo Rezende

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: November 30, 2009

Abstract

This paper studies what determines whether federal and state supervisors examine state banks independently or together. The results suggest that supervisors cooperate in order to support states with lower budgets and capabilities and more banks to supervise. I find that states with larger budgets examine more banks independently, that they accommodate changes in the number of banks mostly through the number of examinations with a federal supervisor and that, when examining banks together, state banking departments that have earned quality accreditation are more likely to write conclusion reports separately from federal supervisors. The results also indicate that regulation impacts joint supervision substantially by determining the characteristics of banks. I show that independent examinations decrease with branch deregulation, which is consistent with the facts that this reform consolidated banks within fewer independent firms and state and federal supervisors are more likely to examine large and complex institutions together.

Keywords: Bank Supervision and Regulation, Bank Examination

JEL Classification: G21, G28

Suggested Citation

Rezende, Marcelo, How Do Joint Supervisors Examine Financial Institutions? The Case of State Banks (November 30, 2009). Finlawmetrics 2010 Conference Paper. Available at SSRN: https://ssrn.com/abstract=1516660 or http://dx.doi.org/10.2139/ssrn.1516660

Marcelo Rezende (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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