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The Economic Crisis: Did Financial Supervision Matter?

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Author Info

  • Marc Quintyn
  • Rosaria Vega Pansini
  • Donato Masciandaro

Abstract

The Asian financial crisis marked the beginning of worldwide efforts to improve the effectiveness of financial supervision. However, the crisis that started in 2007�08 was a crude awakening: several of these improvements seemed unable to avoid or mitigate the crisis. This paper brings the first systematic analysis of the role of two of these efforts - modifications in the architecture of financial supervision and in supervisory governance - and concludes that they were negatively correlated with economic resilience. Using the emerging distinction between macro- and micro-prudential supervision, we explore to what extent two separate institutions would allow for more checks and balances to improve supervisory governance and, thus, reduce the probability of supervisory failure.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/261.

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Length: 47
Date of creation: 01 Nov 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/261

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Related research

Keywords: Asia; Bank supervision; Banks; Central bank role; Financial sector;

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References

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  1. Rose, Andrew K. & Spiegel, Mark M., 2011. "Cross-country causes and consequences of the crisis: An update," European Economic Review, Elsevier, vol. 55(3), pages 309-324, April.
  2. Reinhart, Carmen & Felton, Andrew, 2008. "The First Global Financial Crisis of the 21st Century," MPRA Paper 11862, University Library of Munich, Germany.
  3. Romain Ranciere & Aaron Tornell & Frank Westermann, 2002. "Systemic Crises and Growth," Working Papers 190, Barcelona Graduate School of Economics.
  4. Boyer, Pierre C. & Ponce, Jorge, 2012. "Regulatory capture and banking supervision reform," Journal of Financial Stability, Elsevier, vol. 8(3), pages 206-217.
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  6. Richard Podpiera, 2006. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 5.
  7. Michael Taylor & Marc Quintyn, 2002. "Regulatory and Supervisory Independence and Financial Stability," IMF Working Papers 02/46, International Monetary Fund.
  8. Marc Quintyn, 2007. "Governance of Financial Supervisors and its Effects - A Stocktaking Exercise," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  9. Jorge Ponce, 2010. "A Normative Analysis of Banking Supervision: Independence, Legal Protection and Accountability," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 141-181, July-Dece.
  10. Masciandaro, Donato & Quintyn, Marc & Taylor, Michael W., 2008. "Inside and outside the central bank: Independence and accountability in financial supervision: Trends and determinants," European Journal of Political Economy, Elsevier, vol. 24(4), pages 833-848, December.
  11. Stijn Claessens & Luc Laeven & Deniz Igan & Giovanni Dell'Ariccia, 2010. "Lessons and Policy Implications from the Global Financial Crisis," IMF Working Papers 10/44, International Monetary Fund.
  12. Enrico Berkes & Ugo Panizza & Jean-Louis Arcand, 2012. "Too Much Finance?," IMF Working Papers 12/161, International Monetary Fund.
  13. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 232-262, Summer.
  14. Augusto de la Torre & Alain Ize, 2010. "Regulatory Reform: Integrating Paradigms," International Finance, Wiley Blackwell, vol. 13(1), pages 109-139, 03.
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  16. Stephen G. Cecchetti & Marion Kohler & Christian Upper, 2009. "Financial Crises and Economic Activity," NBER Working Papers 15379, National Bureau of Economic Research, Inc.
  17. Caprio, Gerard Jr. & D'Apice, Vincenzo & Ferri, Giovanni & Puopolo, Giovanni Walter, 2010. "Macro Financial Determinants of the Great Financial Crisis: Implications for Financial Regulation," MPRA Paper 26088, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Hagen, Tobias, 2013. "Impact of national financial regulation on macroeconomic and fiscal performance after the 2007 financial shock: Econometric analyses based on cross-country data," Economics Discussion Papers 2013-26, Kiel Institute for the World Economy.
  2. Dalla Pellegrina, L. & Masciandaro, D. & Pansini, R.V., 2013. "The central banker as prudential supervisor: Does independence matter?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 415-427.
  3. Cihak, Martin & Demirguc-Kunt, Asli, 2013. "Rethinking the state's role in finance," Policy Research Working Paper Series 6400, The World Bank.
  4. Golovnin, M., 2013. "Creation of a Financial Mega-Regulator, and Modern Approaches to the Monetary Policy," Journal of the New Economic Association, New Economic Association, vol. 19(3), pages 149-153.
  5. Cihak, Martin & Demirguc-Kunt, Asli & Johnston, R. Barry, 2013. "Incentive audits : a new approach to financial regulation," Policy Research Working Paper Series 6308, The World Bank.
  6. Cheng Hoon Lim & Ivo Krznar & Fabian Lipinsky & Akira Otani & Xiaoyong Wu, 2013. "The Macroprudential Framework: Policy Responsiveness and Institutional Arrangements," IMF Working Papers 13/166, International Monetary Fund.
  7. Zenathan Hasannudin, 2012. "The structure of bank supervision and corruption in lending: a study for transition economies," Post-Print dumas-00802139, HAL.
  8. Hagen, Tobias, 2013. "Impact of national financial regulation on macroeconomic and fiscal performance after the 2007 financial stock: Econometric analyses based on cross-country data," Working Paper Series: Business and Law 02, Fachhochschule Frankfurt am Main - University of Applied Sciences, Faculty of Business and Law.

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