A Normative Analysis of Banking Supervision: Independence, Legal Protection and Accountability

A Normative Analysis of Banking Supervision: Independence, Legal Protection and Accountability

This paper uses a formal model of a bank supervisor to derive policy implications on the optimal institutional arrangements for effective banking supervision. I find that bank supervisors should have political independence, and that independence should be complemented by legal protection and accountability arrangements for bank supervisors. I provide empirical evidence supporting these results.

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