Showing results 1 to 9 of approximately 9.(refine search)
Macroprudential policy and the revolving door of risk: lessons from leveraged lending guidance
We investigate the U.S. experience with macroprudential policies by studying the interagency guidance on leveraged lending. We find that the guidance primarily impacted large, closely supervised banks, but only after supervisors issued important clarifications. It also triggered a migration of leveraged lending to nonbanks. While we do not find that nonbanks had more lax lending policies than banks, we unveil important evidence that nonbanks increased bank borrowing following the issuance of guidance, possibly to finance their growing leveraged lending. The guidance was effective at reducing ...
How Does Supervision Affect Bank Performance during Downturns?
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 ...
Opening remarks at reforming culture and behavior in the financial services industry: workshop on progress and challenges
Opening Remarks at Reforming Culture and Behavior in the Financial Services Industry: Workshop on Progress and Challenges, Federal Reserve Bank of New York, New York City.
Foreign Investment, Regulatory Arbitrage, and the Risk of U.S. Banking Organizations
This study investigates the implications of cross-country differences in banking regulation and supervision for the international subsidiary locations and risk of U.S. bank holding companies (BHCs). We find that U.S. BHCs are more likely to operate subsidiaries in countries with weaker regulation and supervision and that such location decisions are associated with elevated BHC risk and higher contribution to systemic risk. The quality of BHCs? internal controls and risk management play an important role in these location choices and risk outcomes. Overall, our study suggests that U.S. banking ...
Embedded Supervision: How to Build Regulation into Blockchain Finance
The spread of distributed ledger technology (DLT) in finance could help to improve the efficiency and quality of supervision. This paper makes the case for embedded supervision, i.e., a regulatory framework that provides for compliance in tokenized markets to be automatically monitored by reading the market?s ledger, thus reducing the need for firms to actively collect, verify and deliver data. After sketching out a design for such schemes, the paper explores the conditions under which distributed ledger data might be used to monitor compliance. To this end, a decentralized market is modelled ...
Exploring Risks and Opportunities for Community Banks in an Improving Environment
The Tenth Annual Community Bankers Symposium, co-sponsored by the Federal Reserve Bank of Chicago, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, was held at the Chicago Fed on November 7, 2014. This article summarizes key presentations and discussions at the symposium.
A Microprudential Perspective on the Financial Risks of Climate Change
Remarks at the 2020 Climate Risk Symposium, Global Association of Risk Professionals (delivered via videoconference).
Banking Supervision: The Perspective from Economics
Economists have extensively analyzed the regulation of banks and the banking industry, but have devoted considerably less attention to bank supervision as a distinct activity. Indeed, much of the banking literature has used the terms “supervision” and “regulation” interchangeably. This paper provides a heuristic review of the economics literature on microprudential bank supervision, highlighting broad findings and existing gaps, especially those related to work on supervision’s theoretical underpinnings. The theoretical literature examining the motivation for supervision (monitoring ...
Digital Banking: A Look at the Playing Field
Fintech developments have turbocharged banking services competition, leading to more offerings or specialization.