Architecture of Financial Supervisory Authorities and the Basel Core Principles

Abstract

This paper analyses theoretically and empirically the architecture of supervisory powers, including the role of the central bank and the degree of integration of banking supervision with the supervision of securities and insurance companies. We focus on results on Basel Core Principles compliance to evaluate the association between the quality of banking supervision and the organisation of supervisory powers. The dichotomy between central bank involvement and the level of unification of supervisory powers is confirmed inside our 116 countries sample. We find a positive association between BCP compliance and integration of supervisory powers, and statistically significant findings arise in favour of placing banking supervision inside the central bank.