Risk in Commercial Banking: Evidence from Postwar Failures

Rose, Peter S.; Scott, William L.

doi:10.2307/1057618

Cited by 11 publications

(5 citation statements)

References 7 publications

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“…25 The higher implicit tax induced banks to increase their share of risky assets (relative to riskless) in order to increase return. This finding is consistent with Wheelock (1992) and Rose and Scott (1978), who find that branch banking at the state level had stabilizing effects in other decades, and stands in contrast to studies that have argued that branching has little or no stabilizing effect (Wicker 1980;Carlson 2004).…”

Section: Analysis Of State Bank Suspensionssupporting

confidence: 88%

Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression

Mitchener

2007

The Journal of Law and Economics

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Drawing on the variation in financial distress across U.S. states during the Great Depression, this article suggests how bank supervision and regulation affected banking stability during the Great Depression. In response to well-organized interest groups and public concern over the bank failures of the 1920s, many U.S. states adopted supervisory and regulatory standards that undermined the stability of state banking systems in the 1930s. Those states that prohibited branch banking, had higher reserve requirements, granted their supervisors longer term lengths, or restricted the ability of supervisors to liquidate banks quickly experienced higher state bank suspension rates from 1929 to 1933.

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Section: Analysis Of State Bank Suspensionssupporting

confidence: 88%

Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression

Mitchener

2007

The Journal of Law and Economics

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“…Alternative definitions of branching do not alter this basic finding. 26 This finding is consistent with Wheelock (1992) and Rose and Scott (1978), who find that branch banking at the state level had stabilizing effects in other decades, and stands in contrast to studies that have argued that branching has little or no stabilizing effect (Wicker 1980;Carlson 2004).…”

supporting

confidence: 70%

Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression

Mitchener¹

2006

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“…In his seminal article, Altman (1968) used discriminant analysis over five variables to determine the characteristics of manufacturing firms headed for bankruptcy. His paper ushered in a wave of research applying similar methodology specifically to depository institutions, including Stuhr and van Wicklen (1974), Sinkey (1975Sinkey ( , 1978, Altman (1977), and Rose and Scott (1978).…”

Section: Discriminant Analysis and Supervisory Screensmentioning

confidence: 99%

Are the Causes of Bank Distress Changing? Can Researchers Keep Up?

King¹,

Nuxoll²,

Yeager³

2006

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represent the nature of bank deterioration. Indeed, the few observations that we have of recent bank failures provide evidence consistent with this hypothesis. The changes in the banking environment call for renewed research into the causes of bank distress. The federal supervisory agencies have established research programs pursuing this goal, but-because regulatory banking economists often work on projects with confidential data and because many ongoing projects are not formally disclosed to the public-it can be difficult for outside economists to benefit from this work. By describing some efforts that are currently underway to develop new early-warning models at the Federal Reserve and Federal Deposit Insurance Corporation (FDIC), we attempt to bridge that gap in the hope of stimulating more research in this area beyond that done by government agencies. One strand of the new monitoring devices attempts U nderstanding the causes of insolvency at financial institutions is important for both academic and regulatory reasons, and the effort to model bank deterioration was once a vibrant area of study in empirical finance. Significant advances were made between the late 1960s and late 1980s. Since then, research has slowed considerably on the characteristics of banks headed for trouble, reflecting a sense among researchers that the causes of banking problems are unchanging and well understood. In this article, we argue that this complacency may be unwarranted. 1 The rapid pace of technological and institutional change in the banking sector in recent years suggests that the dominant models may no longer accurately Since 1990, the banking sector has experienced enormous legislative, technological, and financial changes, yet research into the causes of bank distress has slowed. One consequence is that traditional supervisory surveillance models may not capture important risks inherent in the current banking environment. After reviewing the history of these models, the authors provide empirical evidence that the characteristics of failing banks have changed in the past ten years and argue that the time is right for new research that employs new empirical techniques. In particular, dynamic models that use forward-looking variables and address various types of bank risk individually are promising lines of inquiry. Supervisory agencies have begun to move in these directions, and the authors describe several examples of this new generation of early-warning models that are not yet widely known among academic banking economists.

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Risk in Commercial Banking: Evidence from Postwar Failures

Cited by 11 publications

References 7 publications

Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression

Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression

Are Prudential Supervision and Regulation Pillars of Financial Stability? Evidence from the Great Depression

Are the Causes of Bank Distress Changing? Can Researchers Keep Up?

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