Project Management

How Does Bank Lending React To Unexpected Changes In Bank Supervision?

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Executive Summary

The financial crisis that the U.S. is currently experiencing has resulted in proposals for tighter regulation of financial institutions. But implementing new regulatory reforms should be done after a careful analysis of its consequences on the financial system, and more specifically, on banking behavior. Undoubtedly, banking regulation and prudential supervision exists because it is thought to promote an efficient and competitive banking system. It is also thought to help prevent the occurrence of large and sustained financial disruptions caused by banking panics and failures, and, in addition, to reduce depositor's risk exposure to episodes of financial distress.

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