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Competition Among Regulators

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  • Robert Marquez
  • Giovanni Dell'Ariccia

Abstract

This paper shows that competition among regulators reduces regulatory standards relative to a centralized solution. It suggests that a central regulator is more likely to emerge for homogeneous and financially integrated countries. The paper proves these results in a model where regulators concerned with their banking system’s stability and efficiency and with their banks’ profitability set their regulatory policy non-cooperatively. Externalities in bank regulation make the independent solution collectively inefficient. These externalities and the benefits of centralized regulation increase with financial integration, while the costs associated with the loss of independence decrease with the homogeneity of the countries involved.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/73.

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Length: 24
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/73

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Citations

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Cited by:
  1. D'Hulster, Katia, 2011. "Cross border banking supervision : incentive conflicts in supervisory information sharing between home and host supervisors," Policy Research Working Paper Series 5871, The World Bank.
  2. Holger Wolf, 2008. "Rethinking banking supervision in the EU," International Economics and Economic Policy, Springer, Springer, vol. 4(4), pages 357-361, February.
  3. Holthausen, Cornelia & Rønde, Thomas, 2005. "Cooperation in International Banking Supervision," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4990, C.E.P.R. Discussion Papers.
  4. International Monetary Fund, 2006. "Regulatory Capture in Banking," IMF Working Papers 06/34, International Monetary Fund.
  5. Viral V. Acharya, 2003. "Is the International Convergence of Capital Adequacy Regulation Desirable?," Journal of Finance, American Finance Association, American Finance Association, vol. 58(6), pages 2745-2782, December.
  6. Martin Cihák & Jörg Decressin, 2007. "The Case for a European Banking Charter," IMF Working Papers 07/173, International Monetary Fund.
  7. Hardy, Daniel C. & Nieto, Maria J., 2011. "Cross-border coordination of prudential supervision and deposit guarantees," Journal of Financial Stability, Elsevier, Elsevier, vol. 7(3), pages 155-164, August.
  8. International Monetary Fund, 2008. "Cross-Border Coordination of Prudential Supervision and Deposit Guarantees," IMF Working Papers 08/283, International Monetary Fund.
  9. Robert A. Eisenbeis & George G. Kaufman, 2007. "Cross-border banking: challenges for deposit insurance and financial stability in the European Union," Working Paper, Federal Reserve Bank of Atlanta 2006-15, Federal Reserve Bank of Atlanta.
  10. International Monetary Fund, 2009. "A European Mandate for Financial Sector Supervisors in the EU," IMF Working Papers 09/5, International Monetary Fund.
  11. Eisenbeis, Robert A. & Kaufman, George G., 2008. "Cross-border banking and financial stability in the EU," Journal of Financial Stability, Elsevier, Elsevier, vol. 4(3), pages 168-204, September.
  12. Schüler, Martin, 2003. "Incentive Problems in Banking Supervision: The European Case," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 03-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Daniel C. Hardy & María J. Nieto, 2011. "Cross-border coordination of prudential supervision And deposit guarantees," Banco de Espa�a Working Papers 1126, Banco de Espa�a.

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