publication . Other literature type . Research . 2012 . Embargo end date: 01 Jan 2012

Optimal preventive bank supervision

Belhaj, Mohamed; Klimenko, Nataliya;
Open Access
  • Published: 01 Jan 2012
  • Publisher: University of Zurich
  • Country: Switzerland
Early regulator interventions into problem banks is one of the key suggestions of Basel Committee on Banking Supervision. However, no guidance is given on their design. To fill this gap, we outline an incentive-based preventive supervision strategy that eliminates bad asset management in banks. Two supervision techniques are combined: temporary regulatory administration and random audits. Our design ensures good management without excessive supervision costs, through a gradual adjustment of supervision efforts to the bank's financial health. We also allow random audits to be delegated to an independent audit agency and show how to induce agency compliance with r...
Persistent Identifiers
ACM Computing Classification System: ComputingMilieux_LEGALASPECTSOFCOMPUTING
free text keywords: Department of Banking and Finance, 330 Economics
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