Local Bank Supervision

49 Pages Posted: 27 Oct 2023

See all articles by Di Gong

Di Gong

University of International Business and Economics (UIBE) - School of Banking and Finance

Thomas Lambert

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Wolf Wagner

Erasmus University Rotterdam (EUR)

Date Written: September 28, 2023

Abstract

This paper provides novel evidence for informational advantages of local bank supervision, outweighing biases due to the pursuit of local interests. For identification, we exploit a policy reform in China that moved supervision for a subset of bank branches from the national to the city level. Following the reform, these branches were 50 to 74% more likely to face an enforcement action. The tighter local supervision results in more conservative lending by banks, reducing in turn aggregate loan supply in cities with more local supervision. Our findings inform the debate on the design of an optimal supervisory architecture.

Keywords: bank supervision, supervisory architecture, decentralization, enforcement actions, lending, information collection, incentives

JEL Classification: G21, G28

Suggested Citation

Gong, Di and Lambert, Thomas and Wagner, Wolf, Local Bank Supervision (September 28, 2023). Available at SSRN: https://ssrn.com/abstract=4586662 or http://dx.doi.org/10.2139/ssrn.4586662

Di Gong

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Thomas Lambert (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.thomaslambert.org

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Wolf Wagner

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
138
Abstract Views
468
Rank
391,890
PlumX Metrics