Federal Reserve System and the Conference of State Bank Supervisors
Community Banking in the 21st Century
October 3, 2013, Federal Reserve Bank of St. Louis
William Bassett, Estimating Changes in Supervisory Standards and Their Economic Effects
William Bassett, a deputy associate director at the Federal Reserve Board, presents his paper “Estimating Changes in Supervisory Standards and Their Economic Effects,” co-written by Seung Jung Lee and Thomas Spiller, both at the Board. The authors find that standards for assigning CAMELS ratings have generally been in line over the period studied (1991-2011).
Abstract: The disappointingly slow recovery in the United States from the recent recession and financial crisis has once again focused attention on the relationship between financial frictions and economic growth. With bank loans having only recently started growing and still remaining sluggish, some bankers and borrowers have suggested that unnecessarily tight supervisory policies have been a constraint on new lending that is hindering recovery. This paper explores one specific aspect of supervisory policy: whether the standards used to assign commercial bank CAMELS ratings have changed materially over time (1991-2011). We show that models incorporating time-varying parameters or economy-wide variables suggest that standards used in the assignment of CAMELS ratings in recent years generally have been in line with historical experience. Indeed, each of the models used in this analysis suggests that the variation in those standards has been relatively small in absolute terms over most of the sample period. However, we show that when this particular aspect of supervisory stringency becomes elevated, it has a noticeable dampening effect on lending activity in subsequent quarters.
Welcome & Overview (Oct. 2) Moderator: Julie Stackhouse (5:29)
Research Session 1: The Role of Community Banks Research Session 1 Moderator: Scott E. Hein (5:35) Do Community Banks Play a Role in New Firm Survival? (Smith Williams) (18:27) Equipment Lease Financing: The Role of Community Banks (Mohammed Khayum) (13:24) Equipment Lease Financing: The Role of Community Banks (Charles Kelly) (14:03) Small Business Lending and Social Capital: Are Rural Relationships Different? (Kenneth Spong) (25:08) Bank Failure, Relationship Lending and Local Economic Performance (John Kandrac) (22:32) Q&A (16:07)
Evening Keynote Address Dorothy Savarese (38:04)
Community Banking Performance (Oct. 3) Moderator: Richard Brown (5:07) Financial Derivatives at Community Banks (Shelly Shen) (11:12) Lessons from Community Banks that Recovered from Financial Distress (Andrew P. Meyer) (22:40) The Effect of Distance on Community Bank Performance Following Acquisitions and Reorganizations (Timothy J. Yeager) (20:43) Performance of Community Banks in Good Times and Bad Times: Does Management Matter? (Dean F. Amel) (17:02) Research Session 2 Question and Answer Period (21:41)
Supervision and Regulation of Community Banks Moderator: Lamont Black (4:09) Estimating Changes in Supervisory Standards and Their Economic Effects (William F. Bassett) (17:23) The Impact of Dodd-Frank on Community Banks (Tanya D. Marsh) (15:39) Capital Regulation at Community Banks: Lessons from 400 Failures (Robert R. Moore) (14:39) A Failure to Communicate: The Pathology of Too Big to Fail (Harvey Rosenblum) (18:15) Research Session 3 Moderator Wrap-up (14:43) Audience Question and Answer Session (14:46)
Afternoon Keynote Presentation Federal Reserve Governor Jerome Powell (28:27)
Panel Discussion and Presentation of Results from Town Hall Sessions Presenter: Mike Stevens (13:20)
Panel Discussion: Community Banking in the 21st Century: Opportunities, Challenges and Perspectives Moderator: Charles A. Vice (13:32) Curt Hecker (7:38) Bobby P. Martin (12:24) Thomas E. Spitz (8:30) Claire W. Tucker (9:14) Community Banking Panel Question and Answer Period (1:04:29) Julie Stackhouse, Closing Remarks (11:13)