The Impact of Supervision on Bank Performance

82 Pages Posted: 21 Mar 2016 Last revised: 13 May 2019

See all articles by Beverly Hirtle

Beverly Hirtle

Federal Reserve Bank of New York - Banking Studies Department

Anna Kovner

Federal Reserve Bank of New York

Matthew C. Plosser

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: May 1, 2019

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.

Keywords: bank supervision, bank regulation, bank performance

JEL Classification: G21, G28

Suggested Citation

Hirtle, Beverly and Kovner, Anna and Plosser, Matthew C., The Impact of Supervision on Bank Performance (May 1, 2019). FRB of NY Staff Report No. 768. Available at SSRN: https://ssrn.com/abstract=2750313

Beverly Hirtle (Contact Author)

Federal Reserve Bank of New York - Banking Studies Department ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7544 (Phone)
212-720-8363 (Fax)

Anna Kovner

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Matthew C. Plosser

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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