Public Choice

, Volume 121, Issue 1, pp 99-130

First online:

A Stiglerian View on Banking Supervision

  • Friedrich HeinemannAffiliated withCentre for European Economic Research (ZEW)
  • , Martin SchülerAffiliated withCentre for European Economic Research (ZEW)

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According to Stigler’s capture theoryregulation often follows the preferences of producers.Therefore, the interests of the financial industry might be amajor driving force for the ongoing supervisory reform debate.This paper identifies possible interests of the regulatedindustries: Either they might favour strict supervision tocreate barriers for entry. Or they might use their politicalinfluence to press for a lax and low-cost supervisory system.Our empirical results indicate that the private interest viewon banking regulation is indeed relevant and that the data ismore compatible with a “preference for laxity” than with a‘‘barriers to entry’’ view.