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Discussion Paper
The Economics of Bank Supervision: So Much to Do, So Little Time
While bank regulation and supervision are the two main components of banking policy, the difference between them is often overlooked and the details of supervision can appear shrouded in secrecy. In this post, which is based on a recent staff report, we provide a framework for thinking about supervision and its relation to regulation. We then use data on supervisory efforts of Federal Reserve bank examiners to describe how supervisory efforts vary by bank size and risk, and to measure key trade-offs in allocating resources.
Working Paper
Does Access to Bank Accounts as a Minor Improve Financial Capability? Evidence from Minor Bank Account Laws
Banking the unbanked is a common policy goal, but should this include access to bank accounts for minors? This study estimates how teenagers' access to bank accounts affects their financial development. Using variation in state laws, we show policies that permit access to independently-owned accounts increase account ownership at age 16 through age 19, although by age 24 those young adults are banked at similar rates to teens who grew up in states that do not allow minors to own accounts independently. Teens who had access to independently-owned accounts use fewer high-cost alternative ...
Working Paper
A Field Guide to Monetary Policy Implementation Issues in a New World with CBDC, Stablecoin, and Narrow Banks
This paper develops an analytical framework aimed at shedding light on the implications of the evolution of financial market structure for monetary policy implementation and transmission. The basic model builds on that developed in Chen et. al. (2014) which, in turn, draws inspiration from the pioneering work of Tobin (1969) and Gurley and Shaw (1960). The paper focuses, in particular, on the implications of introducing new types of fixed-rate financial assets in the financial system including retail and wholesale central bank digital currency (CBDC), stablecoins issued by narrow nonbanks, ...
Discussion Paper
Regulatory Changes and the Cost of Capital for Banks
In response to the financial crisis nearly a decade ago, a number of regulations were passed to improve the safety and soundness of the financial system. In this post and our related staff report, we provide a new perspective on the effect of these regulations by estimating the cost of capital for banks over the past two decades. We find that, while banks? cost of capital soared during the financial crisis, after the passage of the Dodd-Frank Act (DFA), banks experienced a greater decrease in their cost of capital than nonbanks and nonbank financial intermediaries (NBFI).