Basel Core Principles and Bank Soundness : Does Compliance Matter?

This paper studies whether compliance with the Basel Core Principles for effective banking supervision is associated with bank soundness. Using data for more than 3,000 banks in 86 countries, the authors find that neither the overall index of compl...

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Bibliographic Details
Main Authors:	Demirgüç-Kunt, Asli, Detragiache, Enrica
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING ASSETS RATIOS AUTONOMY BALANCE SHEETS BANK ASSETS BANK BALANCE SHEETS BANK CREDIT BANK EQUITY BANK LOANS BANK PORTFOLIOS BANK RATINGS BANK REGULATION BANK RISK BANK RISK TAKING BANK SUPERVISION BANKING CRISES BANKING CRISIS BANKING LAWS BANKING SECTOR BANKING SECTOR DEVELOPMENT BANKING SUPERVISION BANKING SYSTEM BANKING SYSTEMS BANKS BEST PRACTICES CAPITAL ADEQUACY CAPITAL ADEQUACY RATIOS CAPITAL REGULATION CAPITAL STANDARDS CAPITALIZATION CENTRAL BANKS COMMERCIAL BANK COMMERCIAL BANKS CONFIDENCE CONSOLIDATED SUPERVISION CONTRACT ENFORCEMENT COOPERATIVE BANKS CORPORATE GOVERNANCE CORRUPTION COUNTRY COMPARISONS COUNTRY RISKS CREDIBILITY CREDIT EXPANSION CREDIT INSTITUTIONS CREDIT POLICIES CREDIT RATINGS CRIMINAL CURRENCY DECLARATION DEPOSIT DEPOSIT INSURANCE DEPOSITORS DEVELOPING COUNTRIES EMERGING MARKET EMERGING MARKET COUNTRIES EXCHANGE RATE EXTERNAL AUDITORS FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL POLICIES FINANCIAL REGULATION FINANCIAL RISK FINANCIAL SERVICES FINANCIAL STABILITY FINANCIAL STATEMENTS FINANCIAL STRENGTH FINANCIAL STRENGTH RATING FINANCIAL SYSTEM FOREIGN BANKS GLOBAL BANKING HOST COUNTRY ILLIQUIDITY INFLATION INFLATION INDEX INFLATION RATE INFORMATION DISCLOSURE INTEGRITY INTEREST RATES INTERNATIONAL ACCOUNTING STANDARDS INTERNATIONAL BANK INTERNATIONAL FINANCIAL STATISTICS LAWS LEGAL FRAMEWORK LOAN LOAN SPREADS MACROECONOMIC CONTROL MACROECONOMIC ENVIRONMENT MACROECONOMIC POLICIES MACROECONOMIC VARIABLES MARKET STRUCTURE MONETARY FUND MORTGAGE MORTGAGE BANKS NONPERFORMING LOANS OPERATING COSTS OVERHEAD COSTS PORTFOLIOS PRIVATE CREDIT PRUDENTIAL REGULATIONS PRUDENTIAL SUPERVISION RATING AGENCIES REAL INTEREST REAL INTEREST RATES REGULATORY APPROACHES REGULATORY FRAMEWORKS REGULATORY GOVERNANCE REGULATORY STANDARDS RESERVES RETURN RETURN ON ASSETS RETURN ON EQUITY RETURNS RISK MANAGEMENT RISK TAKING RULE OF LAW SAFETY SAVINGS SAVINGS BANKS SECURITIZATION SHAREHOLDERS SMALL BANKS SOVEREIGN RATING SOVEREIGN RATINGS STORM SUPERVISION OF BANKS SUPERVISORY AGENCIES SUPERVISORY AGENCY SUPERVISORY AUTHORITIES SUPERVISORY FRAMEWORK SYSTEMIC RISK TREASURY
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091116091334 http://hdl.handle.net/10986/4321

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Summary:	This paper studies whether compliance with the Basel Core Principles for effective banking supervision is associated with bank soundness. Using data for more than 3,000 banks in 86 countries, the authors find that neither the overall index of compliance with the Basel Core Principles nor the individual components of the index are robustly associated with bank risk measured by Z-scores. The results of the analysis cast doubt on the usefulness of the Basel Core Principles in ensuring bank soundness.

Basel Core Principles and Bank Soundness : Does Compliance Matter?

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