Proactive Supervisory Policy: Short-term Pain and Long-term Gain

Andrey Sinyakov and Alexey Ponomarenko

No note6, Bank of Russia Working Paper Series from Bank of Russia

Abstract: The study below studies long- and short-term effects of proactive supervisory policy on various types of banks. Basing on a agent-based banking sector model, we compare the short- and long-term effects of two supervisory policies with different degrees of stringency. The results show that the in the short-term a stringent supervisory policy adversely affects small and medium-sized banks, including those that comply with supervisory requirements.Yet, as the banking sector rehabilitates, the benefits from increasing trust in such banks outweigh the short-term losses. Monopolism in the banking sector is reduced and price competition improved.

Keywords: agent-based model; competition in baning sector; banking supervision (search for similar items in EconPapers)
Pages: 14 pages
Date: 2017-07
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Persistent link: https://EconPapers.repec.org/RePEc:bkr:wpaper:note6

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