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" Achieving Credibility : "
Donze, Steve
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Latin Dissertation
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| Record Number
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1097105
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| Doc. No
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TLets498120
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| Main Entry
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Donze, Steve
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| Title & Author
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Achieving Credibility :\ Donze, Steve
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| College
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London School of Economics and Political Science (University of London)
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| Date
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2008
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| student score
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2008
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| Degree
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Ph.D.
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| Abstract
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This thesis addresses the independence of bank supervisory agencies and its effects onbank soundness in industrial countries. It tackles the following underresearchedquestions: whether and, if so, to what extent delegation to independent bank supervisorsstrengthens banking systems; what forms delegation arrangements take: and \\ hichpolitico-institutional and banking market conditions affect the etTecti\ eness ofdelegation. The study isolates theoretically and empiricall) the role of agencyindependence as a source of credibility in banking supervision. The quantitativeanalysis builds on a new cross-sectional data set on legal bank supen isor independencefrom government and industry in OECD countries. The qualitative anal) sis opts for atwo-country (the UK and Japan), two-period (1980-1998 and 1998-2006) case studyframework. The Bank of England, the Ministry of Finance of Japan. and their respectivesuccessor bodies, the Financial Services Authority and the Financial Services Agency,are strongly differentiated according to their independence profile. The thesis offersqualified support for independence as a prerequisite for effective banking supervision,in line with the virtually untested policy prescription contained in the Basel CorePrinciples. Quantitative evidence suggests that higher bank supervisor independencefrom government enhances bank soundness, and does so the more prevailing is the ruleof law. Delegation is more effective in bank-centred, less concentrated financial systems.Legal independence is rarely complete, suggesting that countries have a variety ofmodels of partial delegation to choose from to suit their particular accountability needs.Qualitative evidence provides further support for the beneficial effects of delegation. Itsuggests that \vhile legal independence from industry is not a necessary condition forbank soundness, supervisory capture, at least above some critical thresholds. is c1earl)detrimental. The transmission mechanisms between independence and bank conditionsare discllssed, including the possibility of two-way causality .
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| Added Entry
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London School of Economics and Political Science (University of London)
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