DP12764 The Economics of Supranational Bank Supervision

Author(s): Thorsten Beck, Consuelo Silva-Buston, Wolf Wagner
Publication Date: March 2018
Keyword(s): Supranational supervisory cooperation; cross-border banking; externalities
JEL(s): G1, G2
Programme Areas: Financial Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12764

We document large variation in the propensity and the intensity in which countries cooperate in the supervision of banks. We show that these variations can be linked to differences in cooperation gains. Using hand-collected data on supranational agreements for 4,278 country pairs during the period 1995-2013, we find that proxies for bilateral cooperation gains a) increase the likelihood of cooperation, b) accelerate the adoption of cooperation, c) make intense forms of cooperation more likely. An analysis of regional cooperation shows that their make-up, as well as their evolution, is broadly consistent with predicted cooperation gains. Our findings suggests that a uniform approach to supranational supervision is not necessarily desirable as countries differ considerably in the extent to which theybenefit from cooperation.