Who pays for banking supervision? Principles and practices
AbstractThis paper focuses on the financing of banking supervision. Countries are classified according to who finances banking supervision � the tax payer and/or the supervised industry -, and how the budget and fees are determined. We show that funding regimes differ across countries. Public funding is more often found when banks are supervised by the central bank, while supervision funded via a levy on the regulated banks is more likely in the case of a separate financial authority. Finally, some countries apply mixed funding. In general, there is a trend toward more private funding. We also find a relation between sources of financing and accountability arrangements. Public financing is associated with accountability towards the parliament, while private financing is more likely to go hand in hand with accountability towards the government. The financing issue is important because the financing regime may affect the behaviour of the supervisor and hence the quality of supervision. Regulatory capture, industry capture and the supervisor's self interest may affect supervisory policy. No theoretical model has been developed prescribing the optimal financing of supervision. Our results suggest that the actual choice of financing is a casual one, not based on either considerations of incentive-compatability or on the beneficiary approach. As it is to be expected that financial regulation will become more internationally organized in the future, careful analysis of the financing issue will become even more relevant.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 141.
Date of creation: Jun 2007
Date of revision:
banking supervision; budgetary independence; accountability; financial governance; central banks; financial authorities.;
Find related papers by JEL classification:
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- G3 - Financial Economics - - Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
- NEP-BAN-2007-08-27 (Banking)
- NEP-CBA-2007-08-27 (Central Banking)
- NEP-REG-2007-08-27 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Taylor & Marc Quintyn, 2002. "Regulatory and Supervisory Independence and Financial Stability," IMF Working Papers 02/46, International Monetary Fund.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2001.
"The Colonial Origins of Comparative Development: An Empirical Investigation,"
American Economic Review,
American Economic Association, vol. 91(5), pages 1369-1401, December.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
- Repullo, Rafael, 2000.
"Who Should Act as Lender of Last Resort? An Incomplete Contracts Model,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 32(3), pages 580-605, August.
- Rafael Repullo, 2000. "Who should act as lender of last resort? an incomplete contracts model," Proceedings, Federal Reserve Bank of Cleveland, pages 580-610.
- Repullo, R., 1999. "Who Should Act as Lender of Last Resort? An Incomplete Contracts Model," Papers 9913, Centro de Estudios Monetarios Y Financieros-.
- Udaibir S. Das & Marc Quintyn & Kina Chenard, 2004. "Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis," IMF Working Papers 04/89, International Monetary Fund.
- Alberto Alesina & Guido Tabellini, 2005.
"Why Do Politicians Delegate?,"
NBER Working Papers
11531, National Bureau of Economic Research, Inc.
- Alberto Alesina & Guido Tabellini, 2005. "Why do Politicians Delegate?," Levine's Bibliography 784828000000000470, UCLA Department of Economics.
- Alberto Alesina & Guido Tabellini, 2005. "Why do Politicians Delegate?," Harvard Institute of Economic Research Working Papers 2079, Harvard - Institute of Economic Research.
- Kane, Edward J, 1990. " Principal-Agent Problems in S&L Salvage," Journal of Finance, American Finance Association, vol. 45(3), pages 755-64, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).
If references are entirely missing, you can add them using this form.