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Bank regulation and supervision around the world : a crisis update

  • Cihak, Martin
  • Demirguc-Kunt, Asli
  • Peria, Maria Soledad Martinez
  • Mohseni-Cheraghlou, Amin

This paper presents the latest update of the World Bank Bank Regulation and Supervision Survey, and explores two questions. First, were there significant differences in regulation and supervision between crisis and non-crisis countries? Second, what aspects of regulation and supervision changed significantly during the crisis period? The paper finds significant differences between crisis and non-crisis countries in several aspects of regulation and supervision. In particular, crisis countries (a) had less stringent definitions of capital and lower actual capital ratios, (b) faced fewer restrictions on non-bank activities, (c) were less strict in the regulatory treatment of bad loans and loan losses, and (d) had weaker incentives for the private sector to monitor banks'risks. Survey results also suggest that the overall regulatory response to the crisis has been slow, and there is room to improve regulation and supervision, as well as private incentives to monitor risk-taking. Specifically, comparing regulatory and supervisory practices before and after the global crisis, the paper finds relatively few changes: capital ratios increased (primarily among non-crisis countries), deposit insurance schemes became more generous, and some reforms were introduced in the area of bank governance and bank resolution.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6286.

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Date of creation: 01 Dec 2012
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Handle: RePEc:wbk:wbrwps:6286
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  1. Stijn Claessens & Luc Laeven & Deniz Igan & Giovanni Dell'Ariccia, 2010. "Lessons and Policy Implications From the Global Financial Crisis," IMF Working Papers 10/44, International Monetary Fund.
  2. Gerard Caprio & Asli Demirgüç-Kunt & Edward Kane, 2008. "The 2007 Meltdown in Structured Securitization: Searching for Lessons not Scapegoats," Center for Development Economics 2008-03, Department of Economics, Williams College.
  3. James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc.
  4. 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.
  5. Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2012. "Guardians of Finance: Making Regulators Work for Us," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262017393, June.
  6. Luc Laeven & Fabian Valencia, 2010. "Resolution of Banking Crises; The Good, the Bad, and the Ugly," IMF Working Papers 10/146, International Monetary Fund.
  7. Ross Levine, 2010. "An autopsy of the US financial system: accident, suicide, or negligent homicide," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 2(3), pages 196-213, August.
  8. 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.
  9. Asli Demirgüç-Kunt & Luis Servén, 2010. "Are All the Sacred Cows Dead? Implications of the Financial Crisis for Macro- and Financial Policies," World Bank Research Observer, World Bank Group, vol. 25(1), pages 91-124, February.
  10. Ouarda Merrouche & Erlend Nier, 2010. "What Caused the Global Financial Crisis; Evidenceon the Drivers of Financial Imbalances 1999: 2007," IMF Working Papers 10/265, International Monetary Fund.
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