tailieunhanh - Challenges to the Dual Banking System: The Funding of Bank Supervision

Cost competition between state regulators and the OCC, and among state regulators themselves, has been fueled by two important structural changes that have occurred in the banking indus- try over the past two decades. The number of bank charters has declined, largely because of increased bank merger and consolidation activity, and the size and complexity of banking organiza- tions has increased. The first change—a decline in the number of charters—means that the OCC and state regula- tors are competing for a declining member base. As we have seen, the cost of supervision remains one of the few distinguishing features of charter type. In ways that we explain below, the declin- ing member base. | Challenges to the Dual Banking System The Funding of Bank Supervision by Christine E. Blair and Rose M. Kushmeider This article examines the funding of bank supervision in the context of the dual banking system. Since 1863 commercial banks in the United States have been able to choose to organize as national banks with a charter issued by the Office of the Comptroller of the Currency OCC or as state banks with a charter issued by a state government. The choice of charter determines which agency will supervise the bank the primary supervisor of nationally chartered banks is the OCC whereas state-chartered banks are supervised jointly by their state chartering authority and either the Federal Deposit Insurance Corporation FDIC or the Federal Reserve System Federal Reserve .1 In their supervisory capacity the FDIC and the Federal Reserve generally alternate examinations with the states. The choice of charter also determines a bank s powers capital requirements and lending limits. Over time however the powers of state-chartered and national banks have generally converged and the other differences between a state bank charter and a national bank charter have diminished as well. Two of the differences that remain are the lower supervisory costs enjoyed by state banks and the preemption of certain state laws enjoyed by national banks. The interplay between these two differences is the subject of this article. Specifically we examine how suggestions for altering the way banks pay for supervision may have unintended consequences for the dual banking system. For banks of comparable asset size operating with a national charter generally entails a greater supervisory cost than operating with a state charter. National banks pay a supervisory assessment to the OCC for their supervision. Although state-chartered banks pay an assessment for supervision to their chartering state they are not charged for supervision by either the FDIC or the Federal Reserve. A substantial portion of

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