Banking on the Principles: Compliance with Basel Core Principles and Bank Soundness
IMF Working Papers, October 1, 2006
Source details
- Canonical URL
- Banking on the Principles: Compliance with Basel Core Principles and Bank Soundness
Other formats
Bibliographic details
- Authors: Enrica Detragiache, Thierry Tressel, Asli Demirgüç-Kunt
- Published: October 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451865028.001
Summary findings
- The paper studies whether compliance with the Basel Core Principles for Effective Banking Supervision (BCPs) improves bank soundness.
- There is a significant and positive relationship between bank soundness (measured with Moody's financial strength ratings) and compliance with principles related to information provision.
- Countries that require banks to regularly and accurately report their financial data to regulators and market participants have sounder banks.
- The relationship is robust to controlling for:
- broad indexes of institutional quality,
- macroeconomic variables,
- sovereign ratings,
- reverse causality.
- Measuring soundness through Z-scores yields similar results.
- Implication: transparency is important for making supervisory processes effective and strengthening market discipline.
Policy recommendations
- Countries aiming to upgrade banking regulation and supervision should consider giving priority to information provision over other elements of the core principles.
Methodology and measures (as reported)
- Bank soundness measured with Moody's financial strength ratings.
- Alternative soundness measure: Z-scores (yields similar results).
Publication and metadata
- Authors: Enrica Detragiache, Thierry Tressel, Asli Demirgüç-Kunt
- Publication date: October 1, 2006
- Series: Working Paper No. 2006/242
- Issue: 242
- Volume: 2006
- Pages: 33
- DOI: https://doi.org/10.5089/9781451865028.001
- ISBN: 9781451865028
- ISSN: 1018-5941
- Subjects: Bank regulation, Bank soundness, Bank supervision, Banking, Basel Core Principles
- Keywords: bank, country, WP
Content synthesized from the IMF web landing page for "Banking on the Principles: Compliance with Basel Core Principles and Bank Soundness."