Who Should Supervise? The Structure of Bank Supervision and the Performance of the Financial System
We assemble data on the structure of bank supervision, distinguishing supervision by the central bank from supervision by a nonbank governmental agency and independent from dependent governmental supervisors. Using observations for 140 countries from 1998 through 2010, we find that supervisory responsibility tends to be assigned to the central bank in low-income countries where that institution is one of few public-sector agencies with the requisite administrative capacity. It is more likely to be undertaken by a non-independent agency of the government in countries ranked high in terms of government efficiency and regulatory quality. We show that the choice of institutional arrangement makes a difference for outcomes. Countries with independent supervisors other than the central bank have fewer nonperforming loans as a share of GDP even after controlling for inflation, per capita income, and country and/or year fixed effects. Their banks are required to hold less capital against assets, presumably because they have less need to protect against loan losses. Savers in such countries enjoy higher deposit rates. There is some evidence, albeit more tentative, that countries with these arrangements are less prone to systemic banking crises.
|Date of creation:||Sep 2011|
|Publication status:||published as “ The Architecture and Governance of Financial Supervision: Sources and Implications ” International Finance, Vol. 15, No. 3: 309 - 325, Winter 2012. A lso, NBER Working Paper, 17401, 2011 (with Barry Eichengreen).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marc Quintyn & Michael W. Taylor, 2003.
"Regulatory and Supervisory Independence and Financial Stability,"
CESifo Economic Studies,
CESifo, vol. 49(2), pages 259-294.
- Michael Taylor & Marc Quintyn, 2002. "Regulatory and Supervisory Independence and Financial Stability," IMF Working Papers 02/46, International Monetary Fund.
- Masciandaro, Donato & Quintyn, Marc & Taylor, Michael W., 2008. "Inside and outside the central bank: Independence and accountability in financial supervision: Trends and determinants," European Journal of Political Economy, Elsevier, vol. 24(4), pages 833-848, December.
- Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
- Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group.
- Capie, Forrest & Goodhart, Charles, 1995. "Central banks, macro policy, and the financial system; the nineteenth and twentieth centuries," Financial History Review, Cambridge University Press, vol. 2(02), pages 145-161, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17401. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.