Financial Stability and Central Bank Governance

Michael Koetter, Kasper Roszbach () and Giancarlo Spagnolo

International Journal of Central Banking, 2014, vol. 10, issue 4, 31-68

Abstract: The financial crisis has ignited a debate about the appropriate objectives and the governance structure of central banks. We use novel survey data to investigate the relation between these traits and banking system stability, focusing in particular on their role in micro-prudential supervision. We find that the separation of powers between single and multiple bank supervisors cannot explain credit risk prior to or during the financial crisis. Similarly, a large number of central bank governance traits do not correlate with system fragility. Only the objective of currency stability exhibits a significant relation with non-performing loan levels in the run-up to the crisis. This effect is amplified for those countries with most frequent exposure to IMF missions in the past. Our results suggest that the current policy discussion on whether to centralize prudential supervision under the central bank and the ensuing institutional changes some countries are enacting may not produce the improvements authorities are aiming at. Whether other potential improvements in prudential supervision due to, for example, external disciplinary devices, such as IMF conditional lending schemes, are better suited to increase financial stability requires further research.

JEL-codes: E58 G18 G34 G38 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.ijcb.org/journal/ijcb14q4a2.pdf (application/pdf)
http://www.ijcb.org/journal/ijcb14q4a2.htm (text/html)

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:ijc:ijcjou:y:2014:q:4:a:2

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().