Basel Core Principles and Bank Risk: Does Compliance Matter?
International Monetary Fund (IMF) - Research Department
World Bank - Financial and Private Sector Development
IMF Working Paper No. 10/81
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.
Number of Pages in PDF File: 28
Keywords: Bank reforms, Bank regulations, Bank soundness, Bank supervision, Banks, Basel Core Principles, Credit risk, Cross country analysis, Financial riskworking papers series
Date posted: April 26, 2010
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