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A Normative Analysis of Banking Supervision: Independence, Legal Protection and Accountability

  • Jorge Ponce

    (Banco Central de Paraguay)

This paper uses a formal model of a bank supervisor to derive policy implications on the optimal institutional arrangements for effective banking supervision. I find that bank supervisors should have political independence, and that independence should be complemented by legal protection and accountability arrangements for bank supervisors. I provide empirical evidence supporting these results.Length: 39 pages

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Article provided by Centro de Estudios Monetarios Latinoamericanos in its journal Money Affairs.

Volume (Year): XXIII (2010)
Issue (Month): 2 (July-December)
Pages: 141-181

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Handle: RePEc:cml:moneya:v:xxiii:y:2010:i:2:p:141-181
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  8. Gabillon, Emmanuelle & Martimort, David, 2004. "The benefits of central bank's political independence," European Economic Review, Elsevier, vol. 48(2), pages 353-378, April.
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  10. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
  11. Kocher, Martin G. & Luptácik, Mikulás & Sutter, Matthias, 2006. "Measuring productivity of research in economics: A cross-country study using DEA," Munich Reprints in Economics 18192, University of Munich, Department of Economics.
  12. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
  13. George J. Mailath & Loretta J. Mester, 1993. "A positive analysis of bank closure," Working Papers 94-2, Federal Reserve Bank of Philadelphia.
  14. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309, September.
  15. Michael W Taylor & Marc G Quintyn, 2002. "Regulatory and Supervisory Independence and Financial Stability," IMF Working Papers 02/46, International Monetary Fund.
  16. Gerard Caprio & James Barth & Ross Levine, 2008. "Bank Regulations Are Changing: But For Better or Worse?," Department of Economics Working Papers 2008-09, Department of Economics, Williams College.
  17. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 10, December.
  18. Barth, James R. & Caprio Jr., Gerard & Levine, Ross, 2001. "Bank regulation and supervision : what works best?," Policy Research Working Paper Series 2725, The World Bank.
  19. Eijffinger, Sylvester C. W. & de Haan, Jakob & Koedijk, Kees, 2002. "Small is beautiful: measuring the research input and output of European central banks," European Journal of Political Economy, Elsevier, vol. 18(2), pages 365-374, June.
  20. Kocher, Martin G. & Sutter, Matthias, 2001. "The Institutional Concentration of Authors in Top Journals of Economics during the Last Two Decades," Munich Reprints in Economics 18183, University of Munich, Department of Economics.
  21. Michael W Taylor & Marc G Quintyn & Silvia Ramirez, 2007. "The Fear of Freedom; Politicians and the Independence and Accountability of Financial Sector Supervisors," IMF Working Papers 07/25, International Monetary Fund.
  22. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
  23. Barth, James R. & Caprio, Gerard, Jr. & Levine, Ross, 2008. "Bank regulations are changing : for better or worse ?," Policy Research Working Paper Series 4646, The World Bank.
  24. Marc G Quintyn & Eva H. G. Hüpkes & Michael W Taylor, 2006. "Accountability Arrangements for Financial Sector Regulators," IMF Economic Issues 39, International Monetary Fund.
  25. Jean-Charles Rochet, 2008. "Introduction to Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation," Introductory Chapters, in: Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation Princeton University Press.
  26. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  27. Marcelo Ochoa & Klaus Schmidt-Hebbel, 2006. "El Banco Central de Chile en Comparación con los Bancos Centrales del Mundo," Working Papers Central Bank of Chile 367, Central Bank of Chile.
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