Institutions Matter: Financial Supervision Architecture, Central Bank and Path Dependence. General Trends and the South Eastern European Countries

We propose a path dependence approach to analyze the evolution of the financial supervisory architecture, focusing on the institutional role of the central bank, and then apply our framework to describe the institutional settings in a selected sample of countries. The policymaker who decides to maintain or reform the supervisory architecture is influenced by the existing institutional setting in a systematic way: the more the central bank is actually involved in supervision, the less likely a more concentrated supervisory regime will emerge, and vice versa (path dependence effect). We test the path dependence effect describing and evaluating the evolution and the present state of the architecture of six national supervisory regimes in South Eastern Europe (SEE): Albania, Bulgaria, Greece, Romania, Serbia and Turkey. The study of the SEE countries confirms the postulated role of the central bank in the institutional setting. In five cases the high involvement of the central bank in supervision is correlated with a multi–authority regime, while in one case a high degree of financial supervision unification is related with low central bank involvement.Financial Supervision; Central Banks; Path Dependence; Political Economy; South Eastern Europe.

Institutions Matter: Financial Supervision Architecture, Central Bank and Path-Dependence

Abstract We propose a path-dependence approach to analyzing the evolution of the financial supervisory architecture, focusing on the institutional role of the central bank, and then apply our framework to describing the institutional settings in a selected sample of countries. the policymaker who decides to maintain or reform the supervisory architecture is influenced by the existing institutional setting in a systematic way: the more the central bank is actually involved in supervision, the less likely a more concentrated supervisory regime will emerge, and vice versa (path-dependence effect). We test the path-dependence effect describing and evaluating the evolution and the present state of the architecture of six national supervisory regimes in south eastern europe (see): Albania, Bulgaria, Greece, Romania, serbia, and turkey. the study of the see countries confirms the postulated role of the central bank in the institutional setting. In five cases the high involvement of the central bank in supervision is correlated with a multi-authority regime, while in one case a high degree of financial supervision unification is related with low central bank involvement. JEL Classification: G18, G28, E 58

Financial Sector Crisis and Restructuring: Lessons from Asia

https://www.imf.org/external/pubs/ft/op/opFinsec/op188.pd

The diffusion of financial supervisory governance ideas

Who is watching the financial services industry? Since 1980, there have been multiple waves of thought about whether the ministry of finance, the central bank, a specialized regulator or some combination of these should have supervisory authority. These waves have been associated with the convergence of actual practices. How much and through what channels did internationally promoted ideas about supervisory 'best practice' influence institutional design choices? I use a new dataset of 83 countries and jurisdictions between the 1980s and 2007 to examine the diffusion of supervisory ideas. With this data, I employ Cox Proportional Hazard and Competing Risks Event History Analyses to evaluate the possible causal roles best practice policy ideas might have played. I find that banking crises and certain peer groups can encourage policy convergence on heavily promoted ideas