Market Discipline: Is it Fact or Fiction?

Gup, Benton E.

doi:10.2139/ssrn.449841

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Market Discipline: Is it Fact or Fiction?

26 Pages Posted: 6 Oct 2003

See all articles by Benton E. Gup

Benton E. Gup

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: August 27, 2003

Abstract

The Bank for International Settlements (BIS) is an international organization that fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. The Basel Committee on Banking Supervision, which is part of the BIS, issued a proposal for a New Basel Capital Accord that is to be implemented by participating banks throughout the world in 2006. The New Capital Accord is based, in part, on market discipline. This article examines what market discipline means, the requirements for market discipline, and its effectiveness. The conclusion is that market discipline is a good idea, but it has not been effective in the recent past.

Keywords: Basel Accord, Bank supervision, Market discipline

JEL Classification: G28, G21

Suggested Citation: Suggested Citation

Gup, Benton E., Market Discipline: Is it Fact or Fiction? (August 27, 2003). Available at SSRN: https://ssrn.com/abstract=449841 or http://dx.doi.org/10.2139/ssrn.449841