by Greg Baer
President and Chief Executive Officer at the Bank Policy Institute.
Jun 11, 2024
Compendium
When most think of the regulatory requirements imposed on banks, the financial cost of capital and liquidity requirements come to mind, because they are significant and overt. In contrast, details of the examination regime are difficult to ascertain, because it operates in secret. In recent years, bank examination has expanded significantly in scope and increasingly is used as a substitute for regulation, imposing significant restrictions on banks outside of public view. It is a major driver of the relative unattractiveness of bank equity, the migration of assets from the banking industry, and the drive for economies of scale through merger or acquisition, as that scale includes the ability to absorb massive examination and associated compliance costs.
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