Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146668
Authors: 
Eisenbach, Thomas M.
Lucca, David O.
Townsend, Robert M.
Year of Publication: 
2016
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 769
Abstract: 
We study bank supervision by combining a theoretical model that distinguishes supervision from regulation and a novel dataset on work hours of Federal Reserve supervisors. We highlight the trade-offs between the benefits and costs of supervision and use the model to interpret the relationship between supervisory efforts and bank characteristics observed in the data. More supervisory resources are spent on larger, more complex, and riskier banks. However, hours increase less than proportionally with bank size, suggesting the presence of technological economies of scale in supervision. The data also show reallocation of supervisory hours at times of stress and in the post-2008 enhanced supervisory framework for large banks, providing evidence of constraints on supervisory resources. Finally, we show theoretically the limits to assessing supervisory success based on ex post outcomes, as well as benefits of ex ante commitment policies.
Subjects: 
bank supervision
bank regulation
monitoring
time use
JEL: 
D82
G21
G28
Document Type: 
Working Paper

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