Is Three a Crowd? Competition Among Regulators in Banking
37 Pages Posted: 24 Jan 2003
Date Written: May 2002
Banks are able to switch among three options for a primary federal regulator: the FDIC, the Federal Reserve, and the OCC. We examine why they switch and what the results of switches are. We find support for the hypothesis that competition among regulators has beneficial aspects. Regulators seem to specialize, offering banks that are changing strategy the ability to improve performance by switching regulators. There is also evidence that the ability to switch regulators allows banks to get away from bank examiners that desire a quiet life, that is, examiners that attempt to minimize the effort they spend on work.
Keywords: bank regulation, regulatory competition, race for the bottom
JEL Classification: G21, G28, L51
Suggested Citation: Suggested Citation