Chapter

Regulating Banks

Sean D. Ehrlich

in Access Points

Published in print September 2011 | ISBN: 9780199737536
Published online January 2012 | e-ISBN: 9780199918645 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199737536.003.0005
Regulating Banks

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Every country regulates its banking sector in order to prevent a run on one bank from spreading throughout the banking system and creating a financial crisis. However, countries have many options when creating these prudential regulations, including regulations that banks support, such as maintaining a minimum level of capital as enshrined in the internationally negotiated Basel Accords, or ones that are less friendly to banks, such as restricting banks’ investment opportunities or creating regulators with strong supervisory powers. Access Point Theory argues that countries with many access points should have bank-friendly rules, since banks will have a lobbying advantage over consumers, while countries with fewer access points should have more consumer-friendly rules. The chapter tests this hypothesis by examining capital adequacy standards, deposit insurance systems, investment activity restrictions, and supervisory powers in banking systems in democracies around the world.

Keywords: banking regulations; capital adequacy; deposit insurance; Basel Accords; financial crises; bias

Chapter.  9724 words. 

Subjects: US Politics

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