The Regulation and Supervision of Banks around the World: A New Database

Abstract

Brookings-Wharton Papers on Financial Services 2001 (2001) 183-240 [Access article in PDF] The Regulation and Supervision of Banks around the World: A New Database James R. Barth, Gerard Caprio Jr., and Ross Levine [Comment and Discussion] [Tables] NOTWITHSTANDING ALL the accomplishments in the fields of finance and financial economics in the past two decades, if a survey were taken of all the international consultants on appropriate bank regulation and supervision for developing countries, what would be the best way to predict the advice they would offer? Anecdotal evidence accumulated over the years suggests that an astonishingly high degree of accuracy could be obtained merely by knowing each consultant's country of origin: experts almost always view their own regulatory and supervisory framework as an appropriate model for developing countries. Beyond some inevitable home bias, what would explain such a good fit? The answer is that, until now, there was no systematically assembled database on the way in which countries regulate and supervise their banking systems and thus no comprehensive analysis of which regulations and supervisory practices are [End Page 183] most appropriate. This ignorance provides fertile ground for reforms based on bias instead of facts. To contribute to a better understanding of bank regulatory and supervisory regimes, this paper presents and discusses a new and comprehensive database based on a survey sent to national bank regulatory and supervisory authorities. These data are available to researchers on the World Wide Web. 1 For the first time, the data enable researchers to identify the existing regulation and supervision of banks (and selective features of bank structure and deposit insurance schemes) in 107 countries at all levels of income and in all parts of the world. 2 With this database, it is possible to determine more fully the stylized facts for banking on a global basis. Most important, we compiled these data to lower the marginal cost of doing empirical research on bank regulation and supervision. We expect these data and the ensuing research to provide a much firmer foundation on which authorities around the world can implement reforms. In a companion paper, we use these data to identify those regulatory and supervisory practices associated most closely with better bank performance and more stability. 3 This effort is clearly a beginning, not an end, of work based on our database. The remainder of the paper proceeds as follows. The next section describes the data and how they were obtained. It also draws on our new and comprehensive database to provide a selective overview of some of the important ways in which banking systems differ across countries. The third section discusses and examines ways to group and aggregate variables from this data set to provide a potentially more meaningful characterization of a country's banking system. It also discusses ways in which these variables may be quantified, if they are not already, to better assess the degree to which countries differ. 4 The fourth section describes differences in the variables when countries are aggregated by income level or [End Page 184] region and also presents some correlations among key variables. The final section concludes with some early and illustrative findings using this database. 5 Survey and Data In 1998 we designed and implemented a two-year survey funded by the World Bank to collect detailed and comprehensive information on the regulation and supervision of banks in as many countries as possible. 6 We also requested information on certain aspects of bank structure and deposit insurance schemes. The formulation and completion of the survey entailed a number of interrelated steps. The Basel Committee on Banking Supervision provided us with contact information on bank supervisory personnel in countries around the world so that we could contact appropriate individuals at national regulatory and supervisory agencies. Furthermore, since the World Bank routinely conducts seminars for bank supervisors from emerging-market countries, participants at these sessions were asked to complete the survey. In some cases, World Bank staff personally delivered the survey to the appropriate officials. Despite these efforts...