Bank Supervision: A Legal Scholarship Review

Abstract

Banks always have someone watching over their shoulders, gauging compliance with law, evaluating risk, and correcting behavior. This is bank supervision. We expect a lot from bank supervision. It is supposed to ensure that banks operate in a safe and sound manner, mitigate systemic risk in the larger financial system, promote fair and efficient markets, protect consumers and other bank customers, and maybe more. Legal scholarship scrutinized bank supervision and asks whether legal changes could help supervision more completely reach its goals. Often, however, legal scholarship passes briefly over bank supervision, instead focusing bank regulation (the establishment of the legal rules that banks must operate within). This literature review summarizes existing legal scholarship on banking supervision, examines why supervision is overlooked, and provides possible avenues for future work on supervision.