Banking on the principles: compliance with Basel Core Principles and bank soundness
Enrica Detragiache () and
Thierry Tressel ()
No 3954, Policy Research Working Paper Series from The World Bank
This paper studies whether compliance with the Basel Core Principles for Effective Banking Supervision (BCP) improves bank soundness. BCP compliance assessments provide a unique source of information about the quality of bank supervision and regulation around the world. The authors find a significant and positive relationship between bank soundness (measured with Moody's financial strength ratings) and compliance with principles related to information provision. Specifically, countries that require banks to report regularly and accurately their financial data to regulators and market participants have sounder banks. This relationship is robust to controlling for broad indexes of institutional quality, macroeconomic variables, sovereign ratings, as well as reverse causality. Measuring soundness through z-scores yields similar results. The findings emphasize the importance of transparency in making supervisory processes effective and strengthening market discipline. Countries aiming to upgrade banking regulation and supervision should consider giving priority to information provision over other elements of the Core Principles.
Keywords: Banks&Banking Reform; Financial Intermediation; Corporate Law; Financial Crisis Management&Restructuring; Insurance&Risk Mitigation (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-fmk and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29) Track citations by RSS feed
Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... ered/PDF/wps3954.pdf (application/pdf)
Journal Article: Banking on the principles: Compliance with Basel Core Principles and bank soundness (2008)
Working Paper: Banking on the Principles: Compliance with Basel Core Principles and Bank Soundness (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3954
Access Statistics for this paper
More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().