Does regulatory and supervisory independence affect financial stability?

Nicolò Fraccaroli, Rhiannon Sowerbutts and Andrew Whitworth ()
Additional contact information
Andrew Whitworth: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 893, Bank of England working papers from Bank of England

Abstract: Since the crisis financial regulators and supervisors have been given increased independence from political bodies. But there is no clear evidence of the benefits of these reforms on the stability of the banking sector. This paper fills that void, introducing a new dataset of reforms to regulatory and supervisory independence for 43 countries from 1999-2019. We combine this index with bank-level data to investigate the impact of reforms in independence on financial stability. We find that reforms that bring greater regulatory and supervisory independence are associated with lower non-performing loans in banks’ balance sheets. In addition, we provide evidence that these improvements do not come at the cost of bank efficiency and profitability. Overall, our results show that increasing the independence of regulators and supervisors is beneficial for financial stability.

Keywords: Agency independence; financial stability; banking supervision; banking regulation; regulatory agencies (search for similar items in EconPapers)
JEL-codes: E58 G28 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2020-11-27
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... ancial-stability.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0893

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().