Political Cycles in Financial Regulatory Enforcement

Abstract

While there is extensive research on financial regulatory policies, there is relatively little known about differences in bank regulatory enforcement across countries. This is one of the first attempts to explore how banking supervision activities vary in practice and whether they are influenced by political election cycles. It fits within a larger literature on bureaucratic politics and the influence of crises and politics on bureaucratic behavior. The results indicate that after the global financial crisis of 2007-2008, bank supervision increased during election years only when the supervisory institution was separate from the central bank.

Keywords: financial regulation, bank supervision, political cycles