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Measuring the Quality of Bank Regulation and Supervision, with an Application to Transition Economies

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  • Bilin Neyapti

    (Bilkent University)

  • Nergiz Dincer

    (Bilkent University)

Abstract

This study develops a method to evaluate the quality of a legal framework for bank regulation and supervision (RS) by developing an extensive set of criteria and a coding system. Using this method, we generate an original set of measurements for RS by evaluating the letter of banking laws of 23 transition economies. In doing so, we also utilize the Basle guidelines on banking supervision and the related literature. The indices of RS indicate that legal banking reforms in Poland, Hungary and Estonia have been more ambitious than the rest of the countries in transition. In general, however, banking laws in transition economies indicate a lower regulatory and supervisory quality than indicated by the German banking law, if one is willing to choose the latter as a benchmark. This data set permits an empirical analysis of the relationship between legal RS and macroeconomic performance. The empirical evidence in the paper shows a significant positive relationship between RS and real GDP growth in transition economies.

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File URL: http://www.tek.org.tr/dosyalar/B-NEYAPTI-RSG-04-02.pdf
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Bibliographic Info

Paper provided by Turkish Economic Association in its series Working Papers with number 2004/2.

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Length: 40 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:tek:wpaper:2004/2

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Keywords: Bank regulation and supervision; growth; transition economies;

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References

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  1. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," CID Working Papers 49, Center for International Development at Harvard University.
  2. Cukierman, Alex & Miller, Geoffrey & Neyapti, Bilin, 2001. "Central Bank Reform, Liberalization and Inflation in Transition Economies - An International Perspective," CEPR Discussion Papers 2808, C.E.P.R. Discussion Papers.
  3. Asli Demirguc-Kunt & Enrica Detragiache, 2000. "Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation," Econometric Society World Congress 2000 Contributed Papers 1751, Econometric Society.
  4. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
  5. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July.
  6. Neyapti, Bilin, 2001. "Central bank independence and economic performance in eastern Europe," Economic Systems, Elsevier, vol. 25(4), pages 381-399, December.
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Cited by:
  1. Jakob Haan & Sander Oosterloo, 2006. "Transparency and accountability of central banks in their role of financial stability supervisor in OECD countries," European Journal of Law and Economics, Springer, vol. 22(3), pages 255-271, November.
  2. Bilin Neyapti, 2010. "Modeling Institutional Evolution," Koç University-TUSIAD Economic Research Forum Working Papers 1012, Koc University-TUSIAD Economic Research Forum.
  3. Puspa Amri & Apanard P. Angkinand & Clas Wihlborg, 2011. "International comparisons of bank regulation, liberalization, and banking crises," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(4), pages 322-339, November.
  4. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Economic Growth: A Meta-Analysis," Working Papers 2013/08, Czech National Bank, Research Department.
  5. Delis, Manthos D & Staikouras, Panagiotis, 2009. "On-site audits, sanctions, and bank risk-taking: An empirical overture towards a novel regulatory and supervisory philosophy," MPRA Paper 16836, University Library of Munich, Germany.
  6. Sumru Altug & Mustafa Emin & Bilin Neyapti, 2011. "Institutions and Business Cycles," Koç University-TUSIAD Economic Research Forum Working Papers 1109, Koc University-TUSIAD Economic Research Forum.
  7. Jan Babecky & Tomas Havranek, 2014. "Structural reforms and growth in transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 22(1), pages 13-42, 01.
  8. Bilin Neyapti & Nazire Nergiz Dincer, 2010. "Macroeconomic Impact of Bank Regulation and Supervision : A cross-country investigation," Departmental Working Papers 1005, Bilkent University, Department of Economics.
  9. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Growth in Transition: A Meta-Analysis," Working Papers IES 2013/14, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2013.
  10. Perera, Anil & Ralston, Deborah & Wickramanayake, Jayasinghe, 2013. "Central bank financial strength and inflation: Is there a robust link?," Journal of Financial Stability, Elsevier, vol. 9(3), pages 399-414.
  11. Artur Radziwill & Pawel Smietanka, 2009. "EU's Eastern Neighbours: Institutional Harmonisation and Potential Growth Bonus," CASE Network Studies and Analyses 0386, CASE-Center for Social and Economic Research.
  12. Andrew van Hulten & Michael Webber, 2010. "Do developing countries need 'good' institutions and policies and deep financial markets to benefit from capital account liberalization?," Journal of Economic Geography, Oxford University Press, vol. 10(2), pages 283-319, March.
  13. Perera, Anil & Ralston, Deborah & Wickramanayake, J., 2014. "Impact of off-balance sheet banking on the bank lending channel of monetary transmission: Evidence from South Asia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 195-216.

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