Supervisory information and the frequency of bank examinations

Bank supervisors need timely and reliable information about the financial condition and risk profile of banks. A key source of this information is the on-site, full-scope bank examination. This article evaluates the frequency with which supervisors examine banks by assessing the decay rate of the private supervisory information gathered during examinations. The analysis suggests that this information ceases to provide a useful picture of a bank's current condition after six to twelve quarters. The decay rate appears to be faster in years when the banking industry experiences financial difficulties, and it is significantly faster for troubled banks than for healthy ones. Thus, the analysis suggests that the annual examination frequency currently mandated by law is reasonable, particularly during times of financial stress for the banking industry.Bank supervision ; Banking law

Formulating the imputed cost of equity capital for priced services at Federal Reserve banks

This paper was presented at the conference "Economic Statistics: New Needs for the Twenty-First Century," cosponsored by the Federal Reserve Bank of New York, the Conference on Research in Income and Wealth, and the National Association for Business Economics, July 11, 2002. According to the 1980 Monetary Control Act, the Federal Reserve Banks must establish fees for their priced services to recover all operating costs as well as the imputed costs of capital and taxes that would be incurred by a profit-making firm. Since 2002, the Federal Reserve has made fundamental changes to the calculations used to set the imputed costs. This article describes and analyzes the current approach, which is based on a simple average of three methods as applied to a peer group of bank holding companies. The methods estimate the cost of equity capital from three perspectives_the historical average of comparable accounting earnings, the discounted value of expected future cash flows, and the equilibrium price of investment risk as per the capital asset pricing model. The authors show that the current approach also provides stable and sensible estimates of the cost of equity capital over the past twenty years.Federal Reserve banks - Service charges ; Bank holding companies ; Bank capital ; Depository Institutions Deregulation and Monetary Control Act of 1980

The Federal Reserve's imputed cost of equity capital: a survey

Federal Reserve System ; Capital assets pricing model

How effective is lifeline banking in assisting the 'unbanked'?

Many consumers who lack checking accounts are paying relatively high costs to access the nation's payments system. Legislation aimed at opening the system to these unbanked individuals has centered on requiring commercial banks to offer low-cost "lifeline" accounts. But will cost savings alone motivate these consumers to access the payments system through banks?Checking accounts ; Banks and banking - Service charges ; Poverty

Orbital-Free Molecular Dynamics Simulations of Melting in Na8 and Na20: Melting in Steps

The melting-like transitions of Na8 and Na20 are investigated by ab initio constant energy molecular dynamics simulations, using a variant of the Car-Parrinello method which employs an explicit electronic kinetic energy functional of the density, thus avoiding the use of one-particle orbitals. Several melting indicators are evaluated in order to determine the nature of the various transitions, and compared with other simulations. Both Na8 and Na20 melt over a wide temperature range. For Na8, a transition is observed to begin at approx. 110 K, between a rigid phase and a phase involving isomerizations between the different permutational isomers of the ground state structure. The ``liquid'' phase is completely established at approx. 220 K. For Na20, two transitions are observed: the first, at approx. 110 K, is associated with isomerization transitions between those permutational isomers of the ground state structure which are obtained by interchanging the positions of the surface-like atoms; the second, at approx. 160 K, involves a structural transition from the ground state isomer to a new set of isomers with the surface molten. The cluster is completely ``liquid'' at approx. 220 K.Comment: Revised version, accepted for publication in J. Chem. Phys. The changes include longer simulations for the Na20 microcluster, a more complete comparison to previous theoretical results, and the discussion of some technical details of the method applie