Banking on the Principles: Compliance with Basel Core Principles and Bank Soundness
This study finds that banks receive more favorable Moody's financial strength ratings in countries with better compliance with Basel Core Principles related to information provision. The results are robust to controlling for broad indexes of institutional quality, macroeconomic variables, sovereign ratings, and reverse causality. Compliance with other Core Principles does not affect ratings robustly. Measuring bank soundness through Z-scores yields broadly similar results for advanced and emerging markets. Countries aiming to upgrade banking regulation and supervision should consider giving priority to information provision over other elements of the core principles.
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| Main Authors: | , , |
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| Format: | Journal Article biblioteca |
| Language: | EN |
| Published: |
2008
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| Subjects: | Banks, Other Depository Institutions, Micro Finance Institutions, Mortgages G210, Financial Institutions and Services: Government Policy and Regulation G280, Economic Development: Financial Markets, Saving and Capital Investment, Corporate Finance and Governance O160, |
| Online Access: | http://hdl.handle.net/10986/5634 |
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| Summary: | This study finds that banks receive more favorable Moody's financial strength ratings in countries with better compliance with Basel Core Principles related to information provision. The results are robust to controlling for broad indexes of institutional quality, macroeconomic variables, sovereign ratings, and reverse causality. Compliance with other Core Principles does not affect ratings robustly. Measuring bank soundness through Z-scores yields broadly similar results for advanced and emerging markets. Countries aiming to upgrade banking regulation and supervision should consider giving priority to information provision over other elements of the core principles. |
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