Search Results
Journal Article
Federal Reserve: Artificial Intelligence and Bank Supervision
Artificial intelligence has come a long way since English mathematician, logician, and cryptographer Alan Turing's seminal 1950 essay, "Computing Machinery and Intelligence," which explored the idea of building computers capable of imitating human thought. In 1997, almost 50 years after Turing's essay, AI posted a historic breakthrough when the IBM supercomputer Deep Blue won a chess match against reigning world champion Garry Kasparov. Since then, AI's capabilities have improved rapidly, largely through advances in machine learning (ML), especially in ML models that use digital neural ...
Working Paper
Managing Risk in Cards Portfolios: Risk Appetite and Limits
We describe an important risk management tool at financial institutions, risk appetite frameworks. We observe those frameworks for credit cards portfolios at four large banks and analyze when and why banks adjust them. The risk appetite frameworks for these banks monitor 40 to 150 metrics. We focus on metrics related to outstanding balances of which we identified 79. Overall, we find that these frameworks are sticky. Most adjustments occur during scheduled annual reviews and are relatively limited. Limit breaches are rare. Thresholds are often changed the month after a breach or after the ...
Speech
Calibrating Policy in an Uncertain Time
Remarks delivered at Salt Lake Chamber, Salt Lake City, UT, April 12, 2023, by Mary C. Daly, President and Chief Executive Officer, Federal Reserve Bank of San Francisco.
Working Paper
The Effects of Bank Charter Switching on Supervisory Ratings
I study whether commercial banks can improve their supervisory ratings by switching charters. I use the fees charged by chartering authorities to establish a causal effect from switching on ratings. Banks receive more favorable ratings after they change charters, an effect that is large for both national and state charters. In addition, controlling for bank ratings, banks that switch charters fail more often than others. These results suggest that banks can arbitrage ratings by switching charters and are consistent with regulators competing for banks by rating incoming banks better than ...
Fed Touts Strong Banking System in Supervision Report
U.S. banking conditions remained strong overall in the second half of 2021, with robust capital and liquidity, in addition to improved asset quality.
Speech
Community Banking: Aligning Ideals with Practice
Speech to the American Bankers Association, Phoenix, Arizona, February 18, 2025, by Mary C. Daly, President and Chief Executive Officer, Federal Reserve Bank of San Francisco.Hosted by the American Bankers Association, President Mary C. Daly delivered keynote remarks on the important role of community banks at the 2025 Conference for Community Bankers. Following her remarks, she sat down with Rob Nichols, president and CEO of the American Bankers Association for a moderated discussion.
Speech
Welcoming and Introductory Remarks: 2025 Community Banking Research Conference
St. Louis Fed President Alberto Musalem gave welcoming remarks on Day 2 of the 13th annual Community Banking Research Conference. He also introduced Federal Reserve Gov. Michael Barr. The conference, which is held at the Federal Reserve Bank of St. Louis, was co-sponsored by the Federal Reserve System, Conference of State Bank Supervisors (CSBS) and Federal Deposit Insurance Corp. (FDIC).
Report
Supervising Failing Banks
This paper studies the role of banking supervision in anticipating, monitoring, and disciplining failing banks. We document that supervisors anticipate most bank failures with a high degree of accuracy. Supervisors play an important role in requiring troubled banks to recognize losses, taking enforcement actions, and ultimately closing failing banks. To establish causality, we exploit exogenous variation in supervisory strictness during the Global Financial Crisis. Stricter supervision leads to more loss recognition, reduced dividend payouts, and an increase in the likelihood and speed of ...