Banking Structure and Regulation in 1993 and 2013: A Cross-Country Comparison

Abstract

After two decades of extreme turbulence in banking and financial markets around the world, it is reasonable to ask about the current status of banking regulation and supervision. Our unique starting point for answering that question comes from the fact that 20 years ago we developed the first detailed, multi-country database on banking regulation and supervision. We now compare that 1993 data – the oldest of its kind available – for 19 developed market economies to similar data from the most recent (2011-2012) World Bank survey on banking supervision and regulation. Key observations emerging from our intertemporal cross-country analysis include the following: (1) The very largest banks retain the same kind of dominance in 2011 as they did 20 years ago (before the continued occurrence of ever-more serious financial crises). (2) In the case of some basic banking activities, including funding practices, the nature of systemic risks seems to have remained the same, if not worsened, over time. (3) In at least one respect – scope of coverage – deposit insurance schemes have changed in a way that encourages moral hazard behavior. These observations suggest that there is much more work to be done to address banking risks, starting with the collection and analysis of additional data to help us understand how well banking policies and practices are succeeding around the world.