Abstract
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.
Similar content being viewed by others
References
Barth, J.R., Caprio, G. Jr. and Levine, R. (2001a). The regulation and supervision of banks around the world. A new database. The World Bank. Mimeo.
Barth, J.R., Dopico, L.G., Nolle, D.E. and Wilcox, J.A. (2001). Bank safety and soundness and the structure of bank supervision: A cross-country analysis. Mimeo.
Barth, J.R., Caprio, G. Jr. and Levine, R. (2001b). Banking systems around the globe: Do regulation and ownership affect performance and stability?. In F.S. Mishkin (Ed.), Prudential supervision: What works and what doesn‘t, 31–95. Chicago: The University of Chicago Press.
Barth, J.R., Caprio, G. Jr. and Levine, R. (2002). Bank regulation and supervision: What works best? Mimeo.
Barth, J.R., Dopico, L.G., Nolle, D.E. and Wilcox, J.A. (2002). An international comparison and assessment of the structure of bank supervision. Mimeo.
Becker, G.S. (1983). A theory of competition among pressure groups for political influence. Quarterly Journal of Economics 98: 371–400.
Caprio, G. and Klingebiel, D. (1999). Episodes of systemic and borderline financial crisis. The World Bank. Mimeo.
Demirguc-Kunt, A. and Detragiache, E. (2000). Does deposit insurance increase banking system stability? An empirical investigation. The World Bank. Mimeo.
Demirguc-Kunt, A. and Sobaci, T. (2000). Deposit insurance around the world: A data base. The World Bank. Mimeo.
Demirguc-Kunt, A. and Kane, E.J. (2002). Deposit insurance around the globe: Where does it work? Journal of Economic Perspectives 16: 175–195.
Goodhart, C. (2000). The organisational structure of banking supervision. FSI Occasional Papers No. 1. Basel.
Goodhart, C. and Schoenmaker, D. (1995). Should the functions of monetary policy and banking supervision be separated? Oxford Economic Papers 47: 539–560.
Goodhart, C. and Schoenmaker, D. (1993). Institutional separation between supervisory and monetary agencies. Special Paper No.52. London School of Economics Financial Markets Group (April).
Haubrich, J.G. (1996). Combining bank supervision and monetary policy. Economic Commentary. Federal Reserve Bank of Cleveland (November).
Kane, E.J. (1996). De jure interstate banking: Why only now? Journal of Money, Credit and Banking 28: 141–161.
Kroszner, R.S. (2000). The economics and politics of financial modernization. FRBNY Economic Policy Review. October.
Kroszner, R.S. and Strahan, P.E. (1999). What dives deregulation? Economics and politics of the relaxation of bank branching restrictions. Quarterly Journal of Economics 114: 1437–1467.
Kroszner, R.S. and Strahan, P.E. (2000). Obstacles to optimal policy: The interplay of politics and economics in shaping bank supervision and regulation reforms. NBER Working Paper No. 7582.
Lannoo, K. (2000). Challenges to the structure of financial supervision in the EU. Report of a CEPS Working Party. Brussels.
Peek, J., Rosengren, E.S. and Tootell, G.M.B. (1999). Is bank supervision central to central banking? Quarterly Journal of Economics 114: 629–653.
Peltzman, S. (1976). Toward a more general theory of regulation. Journal of Law and Economics 19: 109–148.
Ramirez, C.D. (2002). The decline and fall of the Glass-Steagall Act: The role of PAC contributions. Mimeo.
Speyer, B. (2001). Internationalisation of banking and banking supervision. Deutsche Bank Research Notes in Economics & Statistics No. 01–7. Frankfurt.
Stigler, G.J. (1971). The theory of economic regulation. Bell Journal of Economics and Management Science 2: 3–21.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Heinemann, F., Schüler, M. A Stiglerian View on Banking Supervision. Public Choice 121, 99–130 (2004). https://doi.org/10.1007/s11127-004-5437-x
Issue Date:
DOI: https://doi.org/10.1007/s11127-004-5437-x