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Proactive Supervisory Policy: Short-term Pain and Long-term Gain

Author

Listed:
  • Andrey Sinyakov

    (Bank of Russia, Russian Federation)

  • Alexey Ponomarenko

    (Bank of Russia, Russian Federation)

Abstract

The study below studies long- and short-term effects of proactive supervisory policy on various types of banks. Basing on a agent-based banking sector model, we compare the short- and long-term effects of two supervisory policies with different degrees of stringency. The results show that the in the short-term a stringent supervisory policy adversely affects small and medium-sized banks, including those that comply with supervisory requirements.Yet, as the banking sector rehabilitates, the benefits from increasing trust in such banks outweigh the short-term losses. Monopolism in the banking sector is reduced and price competition improved.

Suggested Citation

  • Andrey Sinyakov & Alexey Ponomarenko, 2017. "Proactive Supervisory Policy: Short-term Pain and Long-term Gain," Bank of Russia Working Paper Series note6, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:note6
    as

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