An International Comparison and Assessment of the Structure of Bank Supervision

Corporate Finance Review, Forthcoming

Posted: 27 Jun 2003

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Luis G. Dopico

Auburn University

Daniel E. Nolle

affiliation not provided to SSRN

James A. Wilcox

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

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Abstract

Many countries around the world have experienced banking crises in the past two decades, and all countries are witnessing substantial changes in the structure and nature of banking. These developments have led national and multilateral policymakers to focus increased attention on the crucial role of banking supervision. One key issue, on which the current study focuses, is the role and impact of the supervisory structure of the banking industry - the extent to which countries rely on a single supervisory authority or multiple banking supervisors, as well as the role of the central bank in banking supervision.

This issue has received relatively little attention in the literature, especially in terms of empirical analysis. To address this gap, we draw on a database that includes banking data for over 100 countries, first describing key features of the international banking landscape, and in particular highlighting cross-country similarities and differences in the structure of banking supervision. Subsequently, we review previous research on the issue of the structure of banking supervision, almost all of which is conceptual, as opposed to empirical in nature. We summarize arguments for and against having single versus multiple supervisors, and arguments for and against having the central bank as a bank supervisory authority. We then use a difference of means test to ascertain whether differences in the structure of supervision correlate in a statistically significant way with key differences in banking industry structure and powers. We also test whether there are systematic differences in the structure of supervision and the implementation of supervision.

We find that there are several key correlations between banking industry structure and powers, and whether the central bank is a banking supervisor. In general, banking systems with relatively small banks, large government ownership in banking, and relatively high entry barriers are also those systems more likely to have the central bank as a banking supervisor. In addition, central-bank-as-supervisor systems tend to be more restrictive in the range activities allowed to their banks. They rely less on market discipline, but also less heavily on having an explicit deposit insurance system. We find no correlation between the number of banking supervisory authorities (i.e., a single-supervisor or a multiple-supervisors system) and any of the key attributes of banking systems.

Note: This is a description of the paper and not the actual abstract.

Keywords: bank supervision, international banking, cross-country comparisons of banking, central bank

JEL Classification: G2, G21, G28

Suggested Citation

Barth, James R. and Garcia Dopico, Luis and Nolle, Daniel E. and Wilcox, James A., An International Comparison and Assessment of the Structure of Bank Supervision. Corporate Finance Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=326060

James R. Barth

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Luis Garcia Dopico

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Daniel E. Nolle (Contact Author)

affiliation not provided to SSRN

James A. Wilcox

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-2455 (Phone)
510-643-1420 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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