Placing Bank Supervision in the Central Bank

Although keeping bank supervision independent from macroprudential supervision may ensure more checks and balances, placing bank supervision in the central bank could exploit synergies with macroprudential supervision. This paper studies whether placing microprudential supervision of banks, typically the systemic part of the financial system, under the same roof as financial stability policy, typically entrusted to the central bank, can improve financial stability. Specifically, the paper analyzes whether having bank supervision in the central bank mitigated the likelihood of banking crises during 2007–12. The analysis conditions on crisis indicators commonly found in the early-warning models of banking crises, the quality of microprudential supervision, and the quality of macroprudential supervision. The authors find that countries with deeper financial markets and those undergoing rapid financial deepening can better foster financial stability when they put bank supervision in the central bank.

Bibliographic Details

Main Authors:	Melecky, Martin, Podpiera, Anca Maria
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2015-06
Subjects:	BANK NATIONALIZATIONS, MONETARY POLICY, DEPOSIT, MICROSTRUCTURE, CHECKS, DEPOSITS, PRUDENTIAL SUPERVISION, BANK FOR INTERNATIONAL SETTLEMENTS, FINANCIAL DEEPENING, REAL INTEREST RATES, MICRODATA, SUPERVISORY AUTHORITY, INTEREST, CURRENCY CRISES, GUARANTEES, DEBT CRISIS, FINANCIAL DISTRESS, INTEREST RATE, PRIVATE CREDIT, EXCHANGE, BALANCE OF PAYMENTS, BANKING SYSTEM, LIQUIDITY, DEVELOPING COUNTRIES, REAL INTEREST, BANKING SYSTEMS, POLITICAL ECONOMY, HOUSING, LIQUIDITY RISK, MACROECONOMIC CONDITIONS, LOAN, BIS, DUMMY VARIABLE, SAVING, RESERVE, CENTRAL BANKS, INFLATION, INTERNATIONAL BANK, LENDER, CREDIBILITY, CENTRAL BANK, INFORMATION DISCLOSURE, INTERNATIONAL FINANCE, BANK REGULATION, CURRENCY, MORAL HAZARD, RESERVE BANK, LIQUIDATIONS, INTEREST RATES, MONETARY FUND, EMERGING MARKET, CRITERIA, MARKETS, DEBT, FINANCIAL CRISES, BANK RESTRUCTURING, DEPOSIT INSURANCE, INTERNATIONAL ECONOMICS, LOANS, REAL INTEREST RATE, BANKING SECTORS, BANK CREDIT, GROSS DOMESTIC PRODUCT, RULE OF LAW, CRISIS COUNTRIES, FINANCIAL SYSTEM, SUPERVISORY POWERS, FINANCE, BANK POLICY, BANKS, SUPERVISORY AUTHORITIES, EMERGING MARKETS, CRISIS’ COUNTRIES, FEDERAL RESERVE, GOOD, SYSTEMIC RISK, ACCOUNTABILITY, FEDERAL RESERVE BANK, INTERNATIONAL FINANCIAL STATISTICS, FINANCIAL STABILITY, BANKING CRISIS, BANK REGULATIONS, FINANCIAL CRISIS, FUTURE, VALUE, CURRENCY CRISIS, BANK, SYSTEMIC BANKING CRISES, CREDIT, CONFLICTS OF INTEREST, LENDER OF LAST RESORT, MACROECONOMICS, PRICE STABILITY, MANDATES, PROPERTIES, FINANCIAL REGULATION, SHARES, REAL EXCHANGE RATE, MARKET, DEFAULT, LOCAL CURRENCY, SUPERVISION OF BANKS, CREDIT POLICIES, BALANCE OF PAYMENT, SOLVENCY, CREDIT RISK, MACROECONOMIC VARIABLES, INSURANCE, CURRENCY DEPRECIATION, BANK PROFITS, FINANCIAL DEVELOPMENT, RISK, DOMESTIC CREDIT, SHARE, FINANCIAL MARKETS, BANKING, POLITICAL STABILITY, CAPITAL INFLOWS, INSTITUTIONAL DEVELOPMENT, BANK SUPERVISION, CENTRAL BANKING, RISK MANAGEMENT, LENDING, CHECK, CREDIT GROWTH, BANKING SUPERVISION, EXCHANGE RATE, MICROSTRUCTURES, PROFITS, BANKING CRISES, FINANCIAL SYSTEMS, GOVERNMENTS, LIABILITIES, BANKING STABILITY, FINANCIAL OPENNESS, INTERNATIONAL SETTLEMENTS, NONPERFORMING LOANS,
Online Access:	http://documents.worldbank.org/curated/en/2015/06/24680781/placing-bank-supervision-central-bank-implications-financial-stability-based-evidence-global-crisis https://hdl.handle.net/10986/22196
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