Financial Governance of Banking Supervision

32 Pages Posted: 24 Jul 2007

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics

Maria Nieto

Banco de España

Henriette M. Prast

Tiburg University

Date Written: July 20, 2007

Abstract

This article analyses the economics of financing banking supervision and attempts to respond to two questions: What are the most common financing practices? Can the differences in current financing practices be explained by country specific factors? We perform an empirical analysis that identifies the determinants of the financing structure of banks' prudential supervision using a sample of 90 banking supervisors (central banks and financial authorities). We conclude that supervisors in central banks are more likely publicly funded, while financial authorities are more likely funded via a levy on the regulated banks. The financing rule is also explained by the structure of the financial systems. Public funding is more likely in bank oriented structures. Finally, the geographical factor is also significant: European bank supervisors are more oriented towards the private funding regime. In general, we do not find evidence of the role of the political factor, the size of the economy, the level of development and the legal tradition.

Keywords: banking supervision, budgetary governance, central banks, financial authorities

JEL Classification: D78, G21, G28, O17, P16

Suggested Citation

Masciandaro, Donato and Nieto, Maria J. and Prast, Henriette M., Financial Governance of Banking Supervision (July 20, 2007). Banco de España Research Paper No. WP-0725. Available at SSRN: https://ssrn.com/abstract=1001905 or http://dx.doi.org/10.2139/ssrn.1001905

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Maria J. Nieto

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Henriette M. Prast

Tiburg University ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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