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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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File URL: http://www.cemla.org/PDF/moneyaffairs/pub_monaff_xxiii_02.pdf
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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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  1. Jorge E. Galán Camacho & Miguel Sarmiento Paipilla, 2007. "Staff, Functions, and Staff Costs at Central Banks: an International Comparison with a Labor- Demand Model," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 131-179, July-Dece.
  2. Kocher, Martin G & Sutter, Matthias, 2001. "The Institutional Concentration of Authors in Top Journals of Economics during the Last Two Decades," Economic Journal, Royal Economic Society, vol. 111(472), pages F405-21, June.
  3. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
  4. 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.
  5. Richard Paap & Frank Kleibergen, 2004. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Society 2004 Australasian Meetings 195, Econometric Society.
  6. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  7. James R Barth & Gerard Caprio & Ross Levine, 2008. "Bank Regulations are Changing: For Better or Worse?," Comparative Economic Studies, Palgrave Macmillan, vol. 50(4), pages 537-563, December.
  8. Emmanuelle Gabillon & David Martimort, 2004. "The benefits of central bank's political independence," Post-Print hal-00167817, HAL.
  9. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2006. "Governance matters V: aggregate and individual governance indicators for 1996 - 2005," Policy Research Working Paper Series 4012, The World Bank.
  10. Martin G. Kocher & Mikulas Luptacik & Matthias Sutter, 2001. "Measuring Productivity of Research in Economics. A Cross-Country Study Using DEA," Department of Economics Working Papers wuwp077, Vienna University of Economics and Business, Department of Economics.
  11. Michael Taylor & Marc Quintyn, 2002. "Regulatory and Supervisory Independence and Financial Stability," IMF Working Papers 02/46, International Monetary Fund.
  12. George J. Mailath & Loretta J. Mester, 1993. "A positive analysis of bank closure," Working Papers 94-2, Federal Reserve Bank of Philadelphia.
  13. 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.
  14. 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.
  15. Rochet, Jean-Charles, 1992. "Capital requirements and the behaviour of commercial banks," European Economic Review, Elsevier, vol. 36(5), pages 1137-1170, June.
  16. Michael Taylor & Marc 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.
  17. Jean-Charles Rochet, 2008. "Introduction to Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation
    [Why Are There So Many Banking Crises? The Politics and Policy of Bank Regulation]
    ," Introductory Chapters, Princeton University Press.
  18. Gerard Caprio & James Barth & Ross Levine, 2008. "Bank Regulations Are Changing: But For Better or Worse?," Center for Development Economics 2008-04, Department of Economics, Williams College.
  19. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
  20. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  21. BAUWENS, Luc & KIRMAN, Alan & LUBRANO, Michel & PROTOPOPESCU, Camelia, 2003. "Ranking economics departments in Europe: a statistical approach," CORE Discussion Papers 2003050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  22. 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.
  23. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309, November.
  24. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  25. Marc Quintyn & Eva H. G. Hüpkes & Michael Taylor, 2006. "Accountability Arrangements for Financial Sector Regulators," IMF Economic Issues 39, International Monetary Fund.
  26. 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.
  27. 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.
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