Rediscovering Macro-Prudential Regulation: The National Banking Era from the Perspective of 2015

Abstract

We review the bank regulatory and supervisory practices of the National Banking Era and argue that their primary focus was both micro- and macro-prudential. Regulatory limits on real estate lending and large required cash holdings focused on systemic risk issues and successfully limited serious banking system solvency problems. The careful scrutiny of banks’ assets and operations revealed in Examiner Reports, as well as disclosure requirements, and Examiners’ due diligence about the network of reserves held by National Banks, also ensured that depositors and stockholders had ready access to reliable information, which also helped to promote public confidence in systemic stability. We summarize the content of Examiner Reports, including information about the examination process, bank ownership, corporate governance, the composition and quality of loans, dividend payments, and different types of funding. We sample urban locations outside the East, permitting comparison of practices within similar environments across different regions.