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Competition Among Regulators
Author:
Mr. Robert Marquez null

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Mr. Giovanni Dell'Ariccia
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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 073
Language:
English
Publication Date:
01 May 2001
DOI:
https://doi.org/10.5089/9781451849462.001
ISBN:
9781451849462
ISSN:
1018-5941
Pages:
24
Keywords:
WP; banking system; Externalities; banking regulation; financial integration; centralized regulator; bank regulator; equilibrium regulation level; central regulator; independent regulator; regulation k; benevolent regulator; national regulator; Commercial banks; Bank soundness; Foreign banks; Competition; Europe
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper shows that competition among regulators reduces regulatory standards relative to a centralized solution. It suggests that a central regulator is more likely to emerge for homogeneous and financially integrated countries. The paper proves these results in a model where regulators concerned with their banking system’s stability and efficiency and with their banks’ profitability set their regulatory policy non-cooperatively. Externalities in bank regulation make the independent solution collectively inefficient. These externalities and the benefits of centralized regulation increase with financial integration, while the costs associated with the loss of independence decrease with the homogeneity of the countries involved.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund