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The Economics of Supranational Bank Supervision

Published online by Cambridge University Press:  12 August 2022

Thorsten Beck ,
Consuelo Silva-Buston  and
Wolf Wagner
Thorsten Beck*
Affiliation:
University of London The Business School (Formerly Cass), Florence School of Banking and Finance, European University Institute, and CEPR
Consuelo Silva-Buston
Affiliation:
School of Management Pontificia Universidad Católica de Chile consuelosilva@uc.cl
Wolf Wagner
Affiliation:
Rotterdam School of Management and CEPR wagner@rsm.nl
*
Thorsten.Beck@eui.eu (corresponding author)
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Abstract

This article examines the effectiveness of cooperation among bank supervisors using novel data on supranational agreements signed by 93 countries. Exploiting that globally operating banks are differently covered by these agreements, we show that supervisory cooperation generally improves bank stability. The magnitude of the effect is higher for smaller global banks, and when supervisors are more stringent and have access to higher quality information. We also show that actual supervisory cooperation varies across countries consistent with differences in economic costs and benefits of cooperation. This suggests that cooperation is not always desirable, despite being effective in reducing bank risk.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 1 , February 2023 , pp. 324 - 351
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We gratefully acknowledge financial support from the DFID/ESRC grant “Finance and Inclusive Growth in Low Income Countries: The Impact of Global Banking Regulation.” We thank an anonymous reviewer and participants at the 2016 Annual Meeting of the American Economic Association in San Francisco, the 2016 Annual Seminar of the Central Bank of Brazil, Finance UC 2018, and the 2017 International Symposium on Money, Banking and Finance in Paris, as well as seminar participants at the Blavatnik School of Government in Oxford, the Hong Kong Office of the BIS, the Reserve Bank of New Zealand, London School of Economics, DG FISMA of the European Commission, and IMF for comments.

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