The Economics of Supranational Bank Supervision

45 Pages Posted: 6 Mar 2018 Last revised: 2 Dec 2019

See all articles by Thorsten Beck

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Consuelo Silva Buston

Pontifical Catholic University of Chile - School of Business

Wolf Wagner

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Centre for Economic Policy Research (CEPR)

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Date Written: November 29, 2019

Abstract

This paper examines the effectiveness of cooperation among bank supervisors using anovel dataset on supranational agreements among 4,278 country-pairs. Exploiting that globally operating banks are differently covered by these agreements, we show that supervisory cooperation generally improves bank stability. The magnitude of the effect is higher for smaller and less complex banks, and when supervisors are more stringent and have access to higher quality information. We also show that actual supervisory cooperation varies across country-pairs consistent with differences in economic costs and benefits to cooperation. This suggests that cooperation is not always desirable, despite being effective in reducing bank risk

Keywords: Supranational supervisory cooperation; cross-border banking; externalities

JEL Classification: G1, G2

Suggested Citation

Beck, Thorsten and Silva Buston, Consuelo and Wagner, Wolf, The Economics of Supranational Bank Supervision (November 29, 2019). Available at SSRN: https://ssrn.com/abstract=3130124 or http://dx.doi.org/10.2139/ssrn.3130124

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Consuelo Silva Buston

Pontifical Catholic University of Chile - School of Business ( email )

Vicuna Mackenna 4860
Santiago
Chile

Wolf Wagner (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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