Bank supervision, regulation, and efficiency: evidence from the European Union
By Georgios Chortareas, Claudia Girardone, Alexia Ventouri. 2012
423 citations recorded by the source corpus.
This paper investigates the dynamics between key regulatory and supervisory policies and various aspects of commercial bank efficiency and performance for a sample of 22 EU countries over 2000–2008. In the first stage of the analysis we measure efficiency by employing the Data Envelopment Analysis (DEA) technique. In addition, we employ two distinct accounting ratios to capture the costs of intermediation (net interest margin) and cost effectiveness (cost-to-income ratio). Our regression framework includes truncated regressions and generalized linear models. Moreover, we carry out a sensitivity analysis for robustness using a fractional logit estimator. Our results show that strengthening capital restrictions and official supervisory powers can improve the efficient operations of banks. Evidence also indicates that interventionist supervisory and regulatory policies such as private sector monitoring and restricting bank activities can result in higher bank inefficiency levels. Finally, the evidence produced suggests that the beneficial effects of capital restrictions and official supervisory powers (interventionist supervisory and regulatory policies) on bank efficiency are more pronounced in countries with higher quality institutions.
Subfields: Accounting, Finance, Management Science and Operations Research
View Paper: https://www.semanticscholar.org/paper/c4d9cd9554ec2027b55da96401b301414cf74c08
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Citations in the corpus
- The effect of capital ratios on the risk, efficiency and profitability of banks: Evidence from OECD countries (2017, neutral): “…we argue that capital ratios increase bank owners’ incentives to control managers – in response to the ‘more skin in the game’ policy16 – which in turn decreases the probability of bankruptcy, improves information availability, and ultimately ameliorates bank performance (Chortareasa et al., 2012).”
- Bank risk and performance in the MENA region: The importance of capital requirements (2016, background): “Banks with higher capital ratios are more prudent and employ a wiser risk management (Anginer and Demirgüç-Kunt et al., 2014), resulting in increased supervision and monitoring (Chortareas et al., 2012; Demirgüç-Kunt et al., 2013), especially in periods of distress such as political instability.”
- Bank ownership, regulation and efficiency: Perspectives from the Middle East and North Africa (MENA) Region (2017, neutral): “For example, Pasiouras et al. (2009) and Sassi (2013) observe an inverse relationship between capital regulation stringency and bank efficiency, whereas Chortareas et al. (2012) and Barth et al. (2013) show a positive effect of capital regulation.”