FDIC Releases Study on Effects of Supervisory Discipline & Bank Risk

Industry Updates  »  FDIC Releases Study on Effects of Supervisory Discipline & Bank Risk

The FDIC’s Center for Financial Research has produced a white paper which examines the effects of regulatory supervision in regard to safety and soundness and bank’s financial risk.

The study examines three times periods: pre-financial crisis, during the financial crisis, and post-financial crisis.

The analysis is somewhat unique in that it takes into account both formal enforcement actions (which are public) and informal actions which take place between the Agency and the institution. It also examines the effects of the Troubled Asset Relief Program (TARP) during and post-crisis.

The report indicates that post-crisis, informal actions were effective in reducing capital inadequacy risk.

Not surprisingly, however, as the crisis unfolded formal actions were more effective. The report further indicates that post-crisis the relationship between supervisory discipline and risk is less clear.

The report can be accessed here:
https://www.fdic.gov/bank/analytical/cfr/2017/wp2017/cfr-wp2017-05.pdf


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