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Supervisory effectiveness and bank risk

Delis, MD and Staikouras, PK (2011) Supervisory effectiveness and bank risk Review of Finance, 15 (3). pp. 511-543.

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Abstract

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. © The Authors 2011.

Item Type: Article
Authors :
NameEmailORCID
Delis, MDUNSPECIFIEDUNSPECIFIED
Staikouras, PKUNSPECIFIEDUNSPECIFIED
Date : 1 July 2011
Identification Number : https://doi.org/10.1093/rof/rfq035
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:15
Last Modified : 16 May 2017 15:15
URI: http://epubs.surrey.ac.uk/id/eprint/818344

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