The Economics of Supranational Bank Supervision. (12th February 2023)

• Record Type: Journal Article
• Authors: Beck, Thorsten; Silva-Buston, Consuelo; Wagner, Wolf
• Is Part Of: Journal of financial and quantitative analysis. Volume 58:Number 1(2023)
• Page Start: 324
• Page End: 351
• Publication Date: 2023-02-12
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109022000588
• Languages: English
• ISSNs: 0022-1090

Abstract

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.