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The Costs of Supervisory Fragmentation in Europe

Author

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  • Schüler, Martin
  • Heinemann, Friedrich

Abstract

Financial markets in Europe become more and more integrated. The persisting fragmentation of financial supervision, however, constitutes a lasting obstacle to integration. The aim of this paper is to assess these costs of supervisory fragmentation. We find clear evidence for the existence of economies of scale in banking supervision. An increase in supervisory output by one percent causes institutional supervisory cost to rise by only some 0.5 percent. Based on these estimation results we predict institutional cost saving of around 15 percent in a plausible simulation scenario representing a cost-efficient European supervisory framework.

Suggested Citation

  • Schüler, Martin & Heinemann, Friedrich, 2005. "The Costs of Supervisory Fragmentation in Europe," ZEW Discussion Papers 05-01, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:2892
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    File URL: https://www.econstor.eu/bitstream/10419/24095/1/dp0501.pdf
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    References listed on IDEAS

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    1. Charles Goodhart & Dirk Schoenmaker & Paolo Dasgupta, 2002. "The Skill Profile of Central Bankers and Supervisors," Review of Finance, European Finance Association, vol. 6(3), pages 397-427.
    2. Gual, Jordi, 2004. "The Integration of EU Banking Markets," CEPR Discussion Papers 4212, C.E.P.R. Discussion Papers.
    3. Gregory E. Elliehausen, 1998. "The cost of banking regulation: a review of the evidence," Staff Studies 171, Board of Governors of the Federal Reserve System (U.S.).
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    Citations

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    Cited by:

    1. Florian Buck & Eva Schliephake, 2012. "The Regulator's Trade-off: Bank Supervision vs. Minimum Capital," CESifo Working Paper Series 3923, CESifo Group Munich.
    2. Robert A. Eisenbeis, 2006. "Home country versus cross-border negative externalities in large banking organization failures and how to avoid them," FRB Atlanta Working Paper 2006-18, Federal Reserve Bank of Atlanta.
    3. 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.

    More about this item

    Keywords

    financial supervision; costs; economies of scale;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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