Advanced Search
MyIDEAS: Login to save this paper or follow this series

Bank Regulation, Compliance and Enforcement

Contents:

Author Info

  • Singh, Rupinder

    ()
    (BOFIT)

Registered author(s):

    Abstract

    A model is presented where the question of bank regulation is developed under a principal-agent scenario in a regime where the regulator has limited resources and banks may have an incentive to act ultra virus the regulatory standards. If banks are subject to random audit, then compliance is achieved through a system of fines determined according to the extent of non-compliance. The model shows that the choice of internal monitoring of risk is driven by each bank’s choice of the wage contract for its compliance officer who works for the ban for a wage. The officer’s incentive for effective monitoring is heightened by the threat of an internal fine from the bank for any contravention of regulations. Moreover, either a fine on the bank or a fine on the compliance officer alone is sufficient to ensure that efficiency is achieved. The model is useful for the bank regulator in a market economy and in transition economies, where the effective constraint on regulatory capacity is addressed using market-based incentives to ensure prudent regulation and effective supervision, and thereby limit the danger of bank failure and contagion.

    Download Info

    If 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.
    File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp0200.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 2/2000.

    as in new window
    Length: 27 pages
    Date of creation: 15 Feb 2000
    Date of revision:
    Handle: RePEc:hhs:bofitp:2000_002

    Contact details of provider:
    Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
    Phone: + 358 10 831 2268
    Fax: + 358 10 831 2294
    Email:
    Web page: http://www.suomenpankki.fi/bofit_en/
    More information through EDIRC

    Related research

    Keywords: banking; regulation; supervision; enforcement; transition economies;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. David Begg & Richard Portes, 1993. "Enterprise debt and economic transformation (Financial restructuring of the state sector in Central and Eastern Europe)," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(1), pages 116-117, 01.
    2. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," CEP Discussion Papers dp0093, Centre for Economic Performance, LSE.
    3. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 3(1), pages 2-50, October.
    4. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 393-414, July.
    5. Mayes, David G., 1998. "Improving Banking Supervision," Research Discussion Papers 23/1998, Bank of Finland.
    6. Saunders, Anthony & Strock, Elizabeth & Travlos, Nickolaos G, 1990. " Ownership Structure, Deregulation, and Bank Risk Taking," Journal of Finance, American Finance Association, American Finance Association, vol. 45(2), pages 643-54, June.
    7. Bryant, John, 1980. "A model of reserves, bank runs, and deposit insurance," Journal of Banking & Finance, Elsevier, vol. 4(4), pages 335-344, December.
    8. repec:fth:bfsefi:23/98 is not listed on IDEAS
    9. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(3), pages 401-19, June.
    10. Hayne E. Leland and David H. Pyle., 1976. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Research Program in Finance Working Papers, University of California at Berkeley 41, University of California at Berkeley.
    11. Bolton, Patrick, 1990. "Renegotiation and the dynamics of contract design," European Economic Review, Elsevier, vol. 34(2-3), pages 303-310, May.
    12. Lewin, Jeff L. & Trumbull, William N., 1990. "The social value of crime?," International Review of Law and Economics, Elsevier, Elsevier, vol. 10(3), pages 271-284, December.
    13. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(4), pages 647-63, October.
    14. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, Elsevier, vol. 6(1), pages 1-37, January.
    15. Franzoni, Luigi Alberto, 1999. "Negotiated Enforcement and Credible Deterrence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(458), pages 509-35, October.
    16. Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, Elsevier, vol. 6(1), pages 39-57, January.
    17. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    18. Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 15(1), pages 29-39, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:hhs:bofitp:2000_002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Päivi Määttä).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.