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

Format:

Book

Government document

Author/Creator:

Melecky, Martin

Contributor:

Melecky, Martin

Podpiera, Anca Maria

Series:

Policy research working papers.

World Bank e-Library.

Language:

English

Subjects (All):

Finance and Financial Sector Development.

Private Sector Development.

Local Subjects:

Finance and Financial Sector Development.

Private Sector Development.

Physical Description:

1 online resource (34 pages)

Other Title:

Placing Bank Supervision in the Central Bank

Place of Publication:

Washington, D.C., The World Bank, 2015

System Details:

data file

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.