Placing Bank supervision in the Central Bank: implications for financial stability based on evidence from the global crisis

Martin Melecký and Anca Pruteanu-Podpiera

No 7320, Policy Research Working Paper Series from The World Bank

Abstract: 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.

Keywords: Access to Finance; Debt Markets; Banks&Banking Reform; Emerging Markets; Financial Crisis Management&Restructuring (search for similar items in EconPapers)
Date: 2015-06-22
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:7320

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