The Effects of Bank Charter Switching on Supervisory Ratings
78 Pages Posted: 13 Sep 2011 Last revised: 19 Dec 2016
Date Written: November 25, 2016
I study whether commercial banks can improve their supervisory ratings by switching charters. I use the distance between banks' headquarters and chartering authorities' offices to establish a causal effect from switching on ratings. Banks receive better ratings when they switch from national to state charters, and keep their ratings about unchanged when they switch from state to national charters. These results suggest that banks can arbitrage ratings by switching charters and are consistent with some regulators competing for banks by rating incoming banks better than similar banks that they already supervise.
Keywords: Bank Charter, Bank Regulator, Banking Supervision, Ratings
JEL Classification: G21, G28
Suggested Citation: Suggested Citation