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A Stigler View on Banking Supervision

  • Heinemann, Friedrich
  • Schüler, Martin

The system of banking supervision in Europe is undergoing substantial reforms. According to Stigler?s capture theory regulation often follows the preferences of producers. Therefore, the interests of the financial industry might be a major driving force for the ongoing supervisory reform debate. This paper identifies possible interests of the regulated industries: Either they might favour strict supervision to create barriers for entry and thus to reduce competitive pressure in their market. Or they might use their political influence to press for a lax and low-cost supervisory system. A cross-country data base on supervisory systems and financial structure allows the application of a three-step testing procedure. It turns out that the private interest view on regulation is indeed relevant and that the data is more compatible with a ?preference for laxity? than with a ?barriers to entry? view.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-66.

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Date of creation: 2002
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Handle: RePEc:zbw:zewdip:538
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  1. Asli Demirguc-Kunt & Edward J. Kane, 2002. "Deposit Insurance Around the Globe: Where Does It Work?," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 175-195, Spring.
  2. Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October.
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  9. Randall S. Kroszner & Philip E. Strahan, 2000. "Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms," CRSP working papers 512, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  10. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  11. James R. Barth & Gerard Caprio Jr. & Ross Levine, 2001. "Banking Systems around the Globe: Do Regulation and Ownership Affect Performance and Stability?," NBER Chapters, in: Prudential Supervision: What Works and What Doesn't, pages 31-96 National Bureau of Economic Research, Inc.
  12. Randall S. Kroszner & Philip E. Strahan, 2000. "Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms," NBER Working Papers 7582, National Bureau of Economic Research, Inc.
  13. Randall S. Kroszner, 2000. "Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms," University of Chicago - George G. Stigler Center for Study of Economy and State 158, Chicago - Center for Study of Economy and State.
  14. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  15. Barth, James R. & Caprio, Gerard & Levine, Ross, 2000. "Banking systems around the globe : do regulation and ownership affect the performance and stability?," Policy Research Working Paper Series 2325, The World Bank.
  16. Barth, James R. & Caprio Jr, Gerard & Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
  17. Randall S. Kroszner, 2000. "The economics and politics of financial modernization," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 25-37.
  18. Asli Demirgüç-Kunt & Enrica Detragiache, 2000. "Does Deposit Insurance Increase Banking System Stability?," IMF Working Papers 00/3, International Monetary Fund.
  19. Joseph G. Haubrich, 1996. "Combining bank supervision and monetary policy," Economic Commentary, Federal Reserve Bank of Cleveland, issue Nov.
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