Delis, Manthos D and Staikouras, Panagiotis (2010): Supervisory effectiveness and bank risk.
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This paper investigates the role of banking supervision in controlling bank risk. Banking supervision is measured in terms of enforcement outputs (i.e., on-site audits and sanctions). Our results show an inverted U-shaped relationship between on-site audits and bank risk, while the relationship between sanctions and risk appears to be linear and negative. We also consider the combined effect of effective supervision and banking regulation (in the form of capital and market discipline requirements) on bank risk. We find that effective supervision and market discipline requirements are important and complementary mechanisms in reducing bank fragility. This is in contrast to capital requirements, which prove to be rather futile in controlling bank risk, even when supplemented with a higher volume of on-site audits and sanctions.
|Item Type:||MPRA Paper|
|Original Title:||Supervisory effectiveness and bank risk|
|Keywords:||Bank risk; Supervision; Sanctions; Audits|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
G - Financial Economics > G2 - Financial Institutions and Services > G20 - General
|Depositing User:||Manthos Delis|
|Date Deposited:||06. Dec 2010 19:48|
|Last Modified:||02. Jan 2016 20:16|
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Available Versions of this Item
On-site audits, sanctions, and bank risk-taking: An empirical overture towards a novel regulatory and supervisory philosophy. (deposited 18. Aug 2009 00:17)
- Supervisory effectiveness and bank risk. (deposited 06. Dec 2010 19:48) [Currently Displayed]