Implications of the Dual Banking System in the US

This paper examines the differences in characteristics of federal and state chartered banks by using individual commercial bank’s data sets from 1984 to 2006. The findings indicate significant differences between these two groups of banks in terms of their asset and liability management strategies. In line with these differences, credit channel of monetary policy is found to work differently for state and federal banks. Federal banks are found to be more responsive to monetary policy changes.