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Who pays for banking supervision? Principles and trends

Author

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  • Donato Masciandaro
  • Maria J. Nieto
  • Henriette Prast

Abstract

Purpose - This paper aims to analyse the economics of financing banking supervision and attempts to respond to two questions: What are the most common financing practices? Can the differences in current financing practices be explained by country-specific factors, using a path-dependence approach? Design/methodology/approach - The paper performs an empirical analysis that identifies the determinants of the financing structure of banks' prudential supervision using a sample of 90 banking supervisors (central banks and financial authorities). Findings - The paper concludes that supervisors in central banks are more likely to be publicly funded, while financial authorities are more likely to be funded via a levy on the regulated banks. The financing rule is also explained by the structure of the financial systems. Public funding is more likely in bank-oriented structures. Finally, the geographical factor is also significant: European bank supervisors are more oriented towards the private funding regime. Practical implications - In general, the paper does not find evidence of the role of the political factor, the size of the economy, the level of development and the legal tradition. Originality/value - The paper analyses the financial governance of banking supervision in a sample of 90 countries world-wide. The empirical analysis focuses on the financing rules and identifies factors that explain the differences between supervisory authorities.

Suggested Citation

  • Donato Masciandaro & Maria J. Nieto & Henriette Prast, 2007. "Who pays for banking supervision? Principles and trends," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 15(3), pages 303-326, July.
  • Handle: RePEc:eme:jfrcpp:v:15:y:2007:i:3:p:303-326
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Masciandaro, Donato & Nieto, Maria J. & Quintyn, Marc, 2011. "Exploring governance of the new European Banking AuthorityâA case for harmonization?," Journal of Financial Stability, Elsevier, pages 204-214.
    2. Florian Buck & Eva Schliephake, 2012. "The Regulator's Trade-off: Bank Supervision vs. Minimum Capital," CESifo Working Paper Series 3923, CESifo Group Munich.
    3. Buck, Florian & Schliephake, Eva, 2012. "Political Economy of Banking Regulation," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62018, Verein für Socialpolitik / German Economic Association.
    4. Richard Brophy, 2012. "Development of insurance regulation in Ireland," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(3), pages 248-263, July.
    5. Donato Masciandaro & Maria J. Nieto & Marc Quintyn, 2011. "Will They Sing the Same Tune? Measuring Convergence in the New European System of Financial Supervisors," Chapters,in: Handbook of Central Banking, Financial Regulation and Supervision, chapter 17 Edward Elgar Publishing.
    6. Buck, Florian & Schliephake, Eva, 2013. "The regulator’s trade-off: Bank supervision vs. minimum capital," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4584-4598.

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    Keywords

    Banking; Financial management; Governance;

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