Abstract
This study uses the capital adequacy component of the CAMEL rating system to assess whether regulators in the 1980s influenced inadequately capitalized banks to improve their capital. Using a measure of regulatory pressure that is based on publicly available information, I find that inadequately capitalized banks responded to regulators' demands for greater capital. This conclusion is consistent with that reached by Keeley (1988). Yet, a measure of regulatory pressure based on confidential capital adequacy ratings reveals that capital regulation at national banks was less effective than at state-chartered banks. This result strengthens a conclusion reached by Gilbert (1991).
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Much of the research for this article was carried out while I was a graduate student at the University of Florida. I thank Chris James, Mark Flannery and Joel Houston, members of my dissertation committee, for their helpful suggestions and guidance. I also thank the anonymous reviewers and editor Paul Horvitz for many substantive comments on earlier drafts.
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Sloan Swindle, C. Using CAMEL ratings to evaluate regulator effectiveness at commercial banks. J Finan Serv Res 9, 123–141 (1995). https://doi.org/10.1007/BF01068074
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DOI: https://doi.org/10.1007/BF01068074