OCC study finds no safety net subsidy for banks

Regulatory costs for most banks outweigh any benefit from the deposit insurance safety net, according to a research paper by OCC economist Gary Whalen. He found only a small minority of banks receive a net benefit, which is minimal at best. The paper also finds no evidence that banks tend to organize their activities in a bank rather than a bank holding company, as would be expected if banks gained a significant advantage from the safety net.

"This paper suggests that banks gain no competitive edge in the marketplace from the safety net," said Comptroller of the Currency Eugene Ludwig. "Nor does the alleged safety net subsidy give an advantage to conducting activities in a bank …