APPROACH AND CONTEXT

Joseph Schumpeter (1912, p. 74) argued that the banker authorizes the entrepreneur, in the name of society, to innovate. He meant that banks mobilize society's savings and decide who gets to use them. If banks make good decisions, this will maximize the chances that the economy will innovate and thrive. Thus, bank regulation and supervision matter. As illustrated by the differences between the United States and Mexico during the nineteenth century, banking policies can either underwrite growth that benefits society at large, or they can fortify a political fortress that simultaneously enriches the elite while thwarting the aspirations of the many.

To contribute to the understanding of bank regulation and its impact on societies, we construct a new database on banking policies around the world. Within international policy circles, official regulators and supervisors have relied on their experience to formulate best practice recommendations. Clearly, practical experience is essential for designing sound policies.