Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195266
Authors: 
Repullo, Rafael
Year of Publication: 
2018
Citation: 
[Journal:] SERIEs - Journal of the Spanish Economic Association [ISSN:] 1869-4195 [Volume:] 9 [Year:] 2018 [Issue:] 1 [Pages:] 1-26
Abstract: 
This paper presents a model in which a central and a local supervisor contribute their efforts to obtain information on the solvency of a local bank, which is then used by the central supervisor to decide on its early liquidation. This hierarchical model is contrasted with the alternatives of decentralized and centralized supervision, where only the local or the central supervisor collects information and decides on liquidation. The local supervisor has a higher bias against liquidation (supervisory capture) and a lower cost of getting local information (proximity). Hierarchical supervision is the optimal institutional design when the bias of the local supervisor is high but not too high and the costs of getting local information from the center are low but not too low. With low (high) bias and high (low) cost it is better to concentrate all responsibilities in the local (central) supervisor.
Subjects: 
Centralized versus decentralized supervision
Strategic information acquisition
Bank solvency
Bank liquidation
Supervisory capture
Optimal institutional design
JEL: 
G21
G23
D02
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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