## The Economic Crisis: Did Financial Supervision Matter?

_IMF Working Papers, November 1, 2011_

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## Bibliographic details
- Authors: Marc G Quintyn, Rosaria Vega Pansini, Donato Masciandaro
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463924560.001

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### Context and scope
- Publication: IMF Working Papers; Working Paper No. 2011/261.
- Authors: Marc G Quintyn, Rosaria Vega Pansini, Donato Masciandaro.
- Date: November 1, 2011.
- Pages: 47.
- Issue: 261; Volume: 2011.
- DOI: https://doi.org/10.5089/9781463924560.001.
- ISBN: 9781463924560; ISSN: 1018-5941; Stock No: WPIEA2011261.
- Subject focus: Bank supervision, Banking, Basel Core Principles, Economic sectors, Financial crises, Financial regulation and supervision, Public sector, Tax incentives.

### Key findings and analysis
- Historical triggers:
  - The Asian financial crisis initiated global efforts to improve financial supervision.
  - The crisis that began in 2007?08 revealed that many supervisory improvements did not prevent or mitigate that crisis.
- Main empirical conclusion:
  - Modifications in the architecture of financial supervision and in supervisory governance were found to be negatively correlated with economic resilience.
- Conceptual framework:
  - Uses the emerging distinction between macro-prudential supervision and micro-prudential supervision to analyze supervisory arrangements.
- Institutional proposal and analysis:
  - Explores whether separating macro- and micro-prudential supervision into two distinct institutions could create more checks and balances.
  - Argues that improved checks and balances via institutional separation could strengthen supervisory governance and thereby reduce the probability of supervisory failure.

### Policy implications and recommendations
- Reassess supervisory architecture:
  - Reconsider the effectiveness of recent modifications in supervisory architecture given their negative correlation with economic resilience.
- Strengthen supervisory governance:
  - Prioritize governance arrangements that enhance accountability and checks and balances across supervisory functions.
- Institutional design:
  - Evaluate establishing two separate institutions for macro-prudential and micro-prudential supervision to improve governance and reduce supervisory failure risk.
- Governance indicators and involvement:
  - Use governance indicators and measures of central bank involvement and degree of supervision unification to guide reforms.

### Keywords and thematic elements emphasized
- Bank supervision; banking industry; Basel Core Principles; central bank involvement; degree of supervision unification; governance arrangement; governance indicator; macroprudential supervision; microprudential supervision; proactive supervision; prudential supervision; supervisory architecture; supervisory governance; global crisis.

*Source: "The Economic Crisis: Did Financial Supervision Matter?", IMF Working Papers 2011, 261 (2011), Marc G Quintyn, Rosaria Vega Pansini, Donato Masciandaro; accessed via IMF landing page.*

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