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

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  • Urs W. Birchler
  • Matteo Facchinetti

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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Bibliographic Info

Paper provided by Swiss National Bank in its series Working Papers with number 2006-08.

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Length: 35 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:snb:snbwpa:2006-08

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Keywords: bank-supervision;

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References

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Cited by:
  1. Adrian Pop, 2009. "Beyond the Third Pillar of Basel Two: Taking Bond Market Signals Seriously," Working Papers hal-00419241, HAL.
  2. Zhang, Zhichao & Song, Wei & Sun, Xin & Shi, Nan, 2014. "Subordinated debt as instrument of market discipline: Risk sensitivity of sub-debt yield spreads in UK banking," Journal of Economics and Business, Elsevier, vol. 73(C), pages 1-21.

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