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Basel Core Principles and Bank Risk; Does Compliance Matter?

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  • Asli Demirgüç-Kunt
  • Enrica Detragiache

Abstract

This paper studies whether compliance with the Basel Core Principles for effective banking supervision (BCPs) is associated with bank soundness. Using data for over 3,000 banks in 86countries, we find that neither the overall index of BCP compliance nor its individual components are robustly associated with bank risk measured by Z-scores. We also fail to find a relationship between BCP compliance and systemic risk measured by a system-wide Zscore.

Suggested Citation

  • Asli Demirgüç-Kunt & Enrica Detragiache, 2010. "Basel Core Principles and Bank Risk; Does Compliance Matter?," IMF Working Papers 10/81, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/81
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    References listed on IDEAS

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    1. Demirgüç-Kunt, AslI & Detragiache, Enrica & Tressel, Thierry, 2008. "Banking on the principles: Compliance with Basel Core Principles and bank soundness," Journal of Financial Intermediation, Elsevier, vol. 17(4), pages 511-542, October.
    2. Richard Podpiera, 2006. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 1-5.
    3. Boyd, John H. & Runkle, David E., 1993. "Size and performance of banking firms : Testing the predictions of theory," Journal of Monetary Economics, Elsevier, vol. 31(1), pages 47-67, February.
    4. Martin Čihák & Alexander Tieman, 2011. "Quality of Financial Sector Regulation and Supervision Around the World," Chapters,in: Handbook of Central Banking, Financial Regulation and Supervision, chapter 15 Edward Elgar Publishing.
    5. Richard Podpiera, 2004. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Working Papers 04/204, International Monetary Fund.
    6. Dewitt D Marston, 2001. "Financial System Standards and Financial Stability; The Case of the Basel Core Principles," IMF Working Papers 01/62, International Monetary Fund.
    7. Kashyap, Anil K. & Rajan, Raghuram G. & Stein, Jeremy C., 2008. "Rethinking capital regulation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 431-471.
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    Cited by:

    1. Valentina Cioli & Alessandro Giannozzi, 2013. "Basilea 3 e la stabilità finanziaria delle banche: quale relazione con la dimensione della banca?," ECONOMIA E DIRITTO DEL TERZIARIO, FrancoAngeli Editore, vol. 2013(2), pages 261-286.
    2. G. de Cadenas-Santiago & L. de Mesa & A. Sanchís, 2010. "Systemic Risk, an Empirical Approach," Economic Reports 17-2010, FEDEA.
    3. Francesco Marchionne & Beniamino Pisicoli & Michele Fratianni, 2017. "Regulation, financial crises, and liberalization traps," Mo.Fi.R. Working Papers 143, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    4. Valentina Cioli & Alessandro Giannozzi, 2014. "Banche di credito cooperativo come leva di stabilità finanziaria. Un’analisi comparata con le banche commerciali. Appendice," ECONOMIA E DIRITTO DEL TERZIARIO, FrancoAngeli Editore, vol. 2014(2), pages 239-268.
    5. repec:mbr:jmonec:v:6:y:2012:i:4:p:133-166 is not listed on IDEAS

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