Thomas Eisenbach, David Lucca, Robert Townsend, 17 June 2016

The two main elements of bank industry oversight are regulation and supervision. This column provides a framework for thinking about supervision in relation to regulation. Using US data on supervisory hours spent, it finds evidence of economies of scale for bank size. Additionally, less risky banks receive substantially lower amounts of supervisory hours. The findings highlight that supervisors face resource constraints and trade-offs.

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