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Placing Bank supervision in the Central Bank : implications for financial stability based on evidence from the global crisis (English)

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.

Details

  • Author

    Melecky,Martin, Podpiera,Anca Maria

  • Document Date

    2015/06/22

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS7320

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2015/06/22

  • Disclosure Status

    Disclosed

  • Doc Name

    Placing Bank supervision in the Central Bank : implications for financial stability based on evidence from the global crisis

  • Keywords

    banking crisis;Financial Stability;crisis country;global financial crisis;lender of last resort;high real interest rate;Macroprudential Supervision;center for economic policy;ratio of government consumption;world development indicator;financial variable;systemic banking crisis;Check and Balances;explanatory variable;financial sector supervision;financial system;quality of supervision;real exchange rate;cumulative distribution function;quality of bank;balance of payment;future banking crisis;cross country evidence;general equilibrium model;financial sector institution;financial supervision matter;Rule of Law;accurate information disclosure;private sector monitoring;limited dependent variable;economic policy research;regulation and supervision;exchange market mayhem;domestic policy makers;emerging market finance;early warning indicator;early warning system;moral hazard effect;financial deepening;model of crisis;marginal effect;estimation result;macroprudential policy;Banking Supervision;financial depth;parsimonious regressions;real gdp;

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Citation

Melecky,Martin Podpiera,Anca Maria

Placing Bank supervision in the Central Bank : implications for financial stability based on evidence from the global crisis (English). Policy Research working paper,no. WPS 7320 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/363481467986295828/Placing-Bank-supervision-in-the-Central-Bank-implications-for-financial-stability-based-on-evidence-from-the-global-crisis