Description: Placing Bank Supervision in the Central Bank : Implications for Financial Stability Based on Evidence from the Global Crisis

Placing Bank Supervision in the Central Bank : Implications for Financial Stability Based on Evidence from the Global Crisis

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 pl...

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Bibliographic Details
Main Authors:	Melecky, Martin, Podpiera, Anca Maria
Language:	English en_US
Published:	World Bank, Washington, DC 2015
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 http://hdl.handle.net/10986/22196

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Summary:	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.

Placing Bank Supervision in the Central Bank : Implications for Financial Stability Based on Evidence from the Global Crisis

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