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Can bank supervisors rely on market data? A critical assessment from a Swiss perspective

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Author Info
Birchler, Urs () (Swiss National Bank)
Facchinetti, Matteo (Swiss National Bank)

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Abstract

Market data, such as bond spreads or equity price volatility, are a complementary source to bank supervisory information. In Switzerland, meaningful market data are available for a number of banks which constitute a major part of the banking system. Notwithstanding some limitations (biases due to state guarantee for cantonal banks and potential "too-big-to-fail" expectations for big banks) these market data are likely to play a supervisory role in the future. However, once the market expects supervisors to react to market data, these data become endogenous. This may jeopardize the very potential of market data to serve as policy guides.

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File URL: http://www.snb.ch/n/mmr/reference/working_paper_2006_08/source/working_paper_2006_08.n.pdf
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Publisher Info
Paper provided by Swiss National Bank in its series Working Papers with number 2006-8.

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Length: 35 pages
Date of creation: 05 May 2006
Date of revision:
Handle: RePEc:ris:snbwpa:2006_008

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Keywords: bank-supervision;

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Find related papers by JEL classification:
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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