How Does Supervision Affect Bank Performance during Downturns?

Uyanga Byambaa, Beverly Hirtle, Anna Kovner and Matthew Plosser

No 20200408, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Supervision and regulation are critical tools for the promotion of stability and soundness in the financial sector. In a prior post, we discussed findings from our recent research paper which examines the impact of supervision on bank performance (see earlier post How Does Supervision Affect Banks?). As described in that post, we exploit new supervisory data and develop a novel strategy to estimate the impact of supervision on bank risk taking, earnings, and growth. We find that bank holding companies (BHCs or “banks”) that receive more supervisory attention have less risky loan portfolios, but do not have lower growth or profitability. In this post, we examine the benefits of supervision over time, and especially during banking industry downturns.

Keywords: economic downturn; supervision; bank performance (search for similar items in EconPapers)
JEL-codes: E5 G21 G28 (search for similar items in EconPapers)
Date: 2020-04-08
New Economics Papers: this item is included in nep-cba, nep-eff, nep-mac and nep-rmg
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