Cross Border Banking Supervision : Incentive Conflicts in Supervisory Information Sharing between Home and Host Supervisors
The global financial crisis has uncovered a number of weaknesses in the supervision and regulation of cross border banks. One such weakness was the lack of effective cooperation among banking supervisors. Since then, international bodies, such as t...
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| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111103150252 http://hdl.handle.net/10986/3637 |
| Summary: | The global financial crisis has
uncovered a number of weaknesses in the supervision and
regulation of cross border banks. One such weakness was the
lack of effective cooperation among banking supervisors.
Since then, international bodies, such as the G-20, the
Financial Stability Board and the Basel Committee have
actively promoted the use of supervisory colleges. The
objective of this paper is to explore the obstacles to
effective cross border supervisory information sharing. More
specifically, a schematic presentation illustrating the
misalignments in incentives for information sharing between
home and host supervisors under the current supervisory
task-sharing anchored in the Basel Concordat is developed.
This paper finds that in the absence of an ex ante agreed
upon resolution and burden-sharing mechanism and
deteriorating health of the bank, incentive conflicts
escalate and supervisory cooperation breaks down. The
promotion of good practices for cooperation in supervisory
colleges is thus not sufficient to address the existing
incentive conflicts. What is needed is a rigorous analysis
and review of the supervisory task-sharing framework, so
that the right incentives are secured during all stages of
the supervisory process. For this purpose, it is essential
that policy makers integrate and harmonize the current
debates on crisis management, resolution policy and good
supervisory practices for cross border banking supervision. |
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