Regulation versus market discipline in banking supervision:An overview - Part 2

Sijben, Jacques J.
August 2002
Journal of International Banking Regulation;Aug2002, Vol. 4 Issue 1, p55
Academic Journal
Jacques Sijben concludes his two-part paper on global banking supervision. The text focuses on the optimal institutional design of bank supervision, which aims to strengthen the market discipline in the banking industry and to achieve a new financial architecture' to enlarge financial stability in the world economy. In this context special attention is given to the Benston-Kaufman proposal, which aims at a prompt and credible corrective action of the supervisor as soon as capital, including subordinated debt, falls within certain critical limits. In this strategy to enlarge market discipline, an important issue refers to the availability of information and transparency for both supervisors and market participants among at an appropriate judgement of the soundness of the banks. A short overview is given of the most important market-oriented adjustments that have been implemented in international banking supervision since the mid-1980s. The last section of the paper presents summarising conclusions.


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