Synergies between Bank Supervision and Monetary Policy

Joe Peek, Eric S. Rosengren and Geoffrey M. B. Tootell

in Prudential Supervision

Published by University of Chicago Press

Published in print January 2002 | ISBN: 9780226531885
Published online February 2013 | e-ISBN: 9780226531939 | DOI:
Synergies between Bank Supervision and Monetary Policy

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The current structure of bank supervision in the United States has evolved through regulatory competition whereby banks would choose the regulator that most suited their operations. As a result, bank supervision responsibility has not been closely tied to the institutional function of the supervisor. This chapter focuses on determining which institutions the Federal Reserve should supervise based on one of its institutional functions: The Federal Reserve should regulate those banks that provide the greatest synergies between bank supervision and the conduct of monetary policy. The chapter is organized as follows. Section 8.1 provides some background on bank supervisory structure and potential synergies between supervisory information and the conduct of monetary policy. Section 8.2 provides the methodology. Section 8.3 investigates whether informational synergies vary across sets of banks associated with alternative regulatory structure proposals. Section 8.4 discusses the transferability of supervisory data among regulators. The final section provides some conclusions and policy implications. A commentary and discussion summary are also included at the end of the chapter.

Keywords: bank regulation; regulatory competition; Federal Reserve; monetary policy

Chapter.  11634 words. 

Subjects: Financial Markets

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