Flexible and mandatory banking supervision
Alessandro De Chiara,
Luca Livio () and
Jorge Ponce
Journal of Financial Stability, 2018, vol. 34, issue C, 86-104
Abstract:
The implementation of tighter regulation and more powerful supervision may impose large social costs due to the strong reliance on supervisory information that requires direct assessment by a supervisor (i.e. Mandatory Supervision). We show that by introducing a Flexible Supervision contract, which is designed to be chosen by those banks that have incentives to capture the supervisor and allows them to bypass Mandatory Supervision, the most efficient regulation under asymmetric information may be implemented. Benevolent regulators should introduce Flexible Supervision regimes for the less risky, more capitalized and transparent banks in addition to the traditional Mandatory Supervision regime.
Keywords: Banking supervision; Regulatory capture (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)
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http://www.sciencedirect.com/science/article/pii/S1572308917302930
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Related works:
Working Paper: Flexible and Mandatory Banking Supervision (2016) 
Working Paper: Flexible and Mandatory Banking Supervision (2016) 
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:34:y:2018:i:c:p:86-104
DOI: 10.1016/j.jfs.2017.12.002
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