The Economic Crisis: Did Financial Supervision Matter?
IMF Working Papers, November 1, 2011
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- The Economic Crisis: Did Financial Supervision Matter?
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Bibliographic details
- Authors: Marc G Quintyn, Rosaria Vega Pansini, Donato Masciandaro
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463924560.001
Context and scope
- Publication: IMF Working Papers; Working Paper No. 2011/261.
- Authors: Marc G Quintyn, Rosaria Vega Pansini, Donato Masciandaro.
- Date: November 1, 2011.
- Pages: 47.
- Issue: 261; Volume: 2011.
- DOI: https://doi.org/10.5089/9781463924560.001.
- ISBN: 9781463924560; ISSN: 1018-5941; Stock No: WPIEA2011261.
- Subject focus: Bank supervision, Banking, Basel Core Principles, Economic sectors, Financial crises, Financial regulation and supervision, Public sector, Tax incentives.
Key findings and analysis
- Historical triggers:
- The Asian financial crisis initiated global efforts to improve financial supervision.
- The crisis that began in 2007?08 revealed that many supervisory improvements did not prevent or mitigate that crisis.
- Main empirical conclusion:
- Modifications in the architecture of financial supervision and in supervisory governance were found to be negatively correlated with economic resilience.
- Conceptual framework:
- Uses the emerging distinction between macro-prudential supervision and micro-prudential supervision to analyze supervisory arrangements.
- Institutional proposal and analysis:
- Explores whether separating macro- and micro-prudential supervision into two distinct institutions could create more checks and balances.
- Argues that improved checks and balances via institutional separation could strengthen supervisory governance and thereby reduce the probability of supervisory failure.
Policy implications and recommendations
- Reassess supervisory architecture:
- Reconsider the effectiveness of recent modifications in supervisory architecture given their negative correlation with economic resilience.
- Strengthen supervisory governance:
- Prioritize governance arrangements that enhance accountability and checks and balances across supervisory functions.
- Institutional design:
- Evaluate establishing two separate institutions for macro-prudential and micro-prudential supervision to improve governance and reduce supervisory failure risk.
- Governance indicators and involvement:
- Use governance indicators and measures of central bank involvement and degree of supervision unification to guide reforms.
Keywords and thematic elements emphasized
- Bank supervision; banking industry; Basel Core Principles; central bank involvement; degree of supervision unification; governance arrangement; governance indicator; macroprudential supervision; microprudential supervision; proactive supervision; prudential supervision; supervisory architecture; supervisory governance; global crisis.
Source: "The Economic Crisis: Did Financial Supervision Matter?", IMF Working Papers 2011, 261 (2011), Marc G Quintyn, Rosaria Vega Pansini, Donato Masciandaro; accessed via IMF landing page.