Working Paper

Did U.S. bank supervisors get tougher during the credit crunch? Did they get easier during the banking boom? Did it matter to bank lending?

Abstract: We test three hypotheses regarding changes in supervisory \"toughness\" and their effects on bank lending. The data provide modest support for all three hypotheses that there was an increase in toughness during the credit crunch period (1989-1992), that there was a decline in toughness during the boom period (1993-1998), and that changes in toughness, if they occurred, affected bank lending. However, all of the measured effects are small, with 1% or less of loans receiving harsher or easier classification, about 3% of banks receiving better or worse CAMEL ratings, and bank lending being changed by 1% or less of assets.

Keywords: Bank supervision; Credit; Bank loans;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2000

Number: 2000-39