The ‘regime context’ of banking supervisors’ competence: the Swedish case over the twentieth century

"The quality of banking supervision is generally recognized to depend on the quality of the banking supervisors. In this paper the Swedish banking supervisor, the Bank Inspection Board’s, aggregate human capital (education and different types of work experience) is analyzed over a long period, and related to the financial environment and events that shaped Swedish the 20th century. The study finds that the human capital mix, (that is, work experience from supervision, private sector and the public sector), of the supervisor was relatively well balanced around the banking crises of 1907-8 and in 1932. In the financial crisis of the 1920s, the staff had too little in-house experience, while in the 1990s crisis its seems that the supervisor had too much in-house experience (and too little experience from the banking sector). The paper further discusses how the supervisor’s human capital composition is related to the overall financial regulatory regime, which ultimately defines the role of the banking supervisor. The strict regulatory regime from World War 2 until the mid 1980s was enforced by the Swedish central bank and de facto became supervisor of the banks during this regime. This seems to explain the ‘deterioration’ of the competence of the still de jure supervisor, the Bank Inspection Board, during this period and its ill preparedness when the strict regime was transformed to a marked based regime."