Download Prudential Supervision: What Works and What Doesn't by Frederic S. Mishkin PDF

By Frederic S. Mishkin

Since banking structures play an important function in keeping the general health and wellbeing of the economic system, the opposed results of poorly supervised structures could be rather critical. with no a few kind of vigilant exterior oversight, banking platforms may fall prey to over the top possibility taking, ethical threat, and corruption. Prudential supervision presents that oversight, utilizing executive rules and tracking to make sure the steadiness of the banking method and, by means of extension, the economic climate at huge. The members to this considerate quantity research the present kingdom of prudential supervision, targeting basic concerns and key pragmatic issues. Why is prudential supervision so vital? What forms of extra needs to it defend opposed to? What specific kinds does it take? Which of those are the simplest deterrents opposed to mismanagement and procedure overload in modern-day swiftly moving monetary weather? The members foresee a persevered circulation past easy regulatory principles in banking and towards a extra energetic evaluate and supervision of a bank's chance administration practices.

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These alternative measures produced similar results, however. Securities Development Total value traded equals the value of domestic equities traded on domestic exchanges divided by GDP, averaged over the 1980–95 period (Beck, Demirgu¨ c¸ -Kunt, and Levine 2001). Levine and Zervos (1998) show that stock market liquidity is important for economic growth. They further note that it is liquidity per se, not equity market capitalization, that is crucial. We also used measures of primary market activity and bond market activity.

The supervisory authority adopted a version of the CAMELS system used in the United States and used CAMELS ratings to set capital requirements. Calomiris and Powell find that although the BASIC system has worked reasonably well, some elements are problematic. The subordinated debt requirement, which was to be in place by January 1998, has not worked as well as some of its advocates had hoped. The Asian crisis in mid-1997 and the Russian crisis in the fall of 1998 made debt issues very difficult for the banks.

We also compute a summary index of the first four indicators of the regulatory restrictions imposed on banks. Specifically, Restrict equals the average of Securities, Insurance, Real Estate, and Banks Owning Nonfinancial Firms. 2 presents summary statistics indicating the extensive cross-country variation in the data. For example, there were nine countries with very restrictive regulatory systems (Restrict Ͼ 3): Japan, Mexico, Rwanda, Ecuador, Barbados, Botswana, Indonesia, Zimbabwe, and Guatemala.

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