## Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis

_IMF Working Papers, May 1, 2004_

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## Bibliographic details
- Authors: Udaibir S Das, Marc G Quintyn, Kina Chenard
- Published: May 1, 2004
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451851311.001

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### Summary
- The paper provides empirical evidence that the quality of regulatory governance—governance practices adopted by financial system regulators and supervisors—matters for financial system soundness.
- Indices of financial system soundness and regulatory governance are constructed based on country data collected from the Financial Sector Assessment Program (FSAP).
- Regression results indicate that regulatory governance has a significant influence on financial system soundness, along with variables reflecting macroeconomic conditions, the structure of the banking system, and the quality of political institutions and public sector governance.
- The results also indicate that good public sector governance amplifies the impact of regulatory governance on financial system soundness.

### Data and Methods
- Data source: Financial Sector Assessment Program (FSAP) country data.
- Constructed indices:
  - Index of financial system soundness.
  - Index of regulatory governance.
- Empirical approach: Regression analysis to evaluate the influence of regulatory governance and other factors on financial system soundness.

### Key Findings
- Regulatory governance has a significant influence on financial system soundness.
- Other significant determinants of financial system soundness include:
  - Macroeconomic conditions.
  - Structure of the banking system.
  - Quality of political institutions.
  - Public sector governance.
- Good public sector governance amplifies the positive impact of regulatory governance on financial system soundness.

### Policy Implications
- Strengthening regulatory governance practices at financial system regulators and supervisors can improve financial system soundness.
- Improvements in public sector governance can enhance the effectiveness of regulatory governance reforms.
- Policy efforts should consider interactions between macroeconomic policy, banking system structure, political institutions, and governance reforms to bolster financial stability.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/does-regulatory-governance-matter-for-financial-system-stability-an-empirical-analysis-17410_