Who Pays for Banking Supervision? Principles, Practices, and Determinants

University of Bocconi Monetary and Financial Economics Working Paper No. 169

49 Pages Posted: 21 Jul 2006

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics

Maria Nieto

Banco de España

Henriëtte Prast

Bank of the Netherlands; Tilburg University

Date Written: April 2006

Abstract

This paper is focused on the economics of financing banking supervision. Two questions are investigated: What are the most common financing practices? Can we explain differences in current financing practices by country specific factors, using a path dependence approach? Given a sample of 90 banking supervisors (central banks and financial authorities), we perform an empirical analysis that identifies the determinants of the financing structure of banks' prudential supervision. First, the financing rule is a function of the type of supervisory authority: if the supervisor is a central bank the public funding is more likely to occur, while the probability of a supervision funded via a levy on the regulated banks is higher if the supervisor is a financial authority. Secondly, the financing rule depends on the structure of the financial systems. In the bank oriented systems, the public funding is more likely to occur. Finally the geographical factor is also significant: European countries seem to be more oriented towards the private funding regime. In general we do not find evidence of the role of the political factor, the economy's size or the level of development and legal tradition.

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

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

Suggested Citation

Masciandaro, Donato and Nieto, Maria J. and Prast, Henriëtte, Who Pays for Banking Supervision? Principles, Practices, and Determinants (April 2006). University of Bocconi Monetary and Financial Economics Working Paper No. 169. Available at SSRN: https://ssrn.com/abstract=918166 or http://dx.doi.org/10.2139/ssrn.918166

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

Henriëtte Prast

Bank of the Netherlands ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Tilburg University

Postbus 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

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