Banks will want to influence the bank regulator to favor their interests, and they typically have the means to do so. It is shown that such ""regulatory capture"" in banking does not imply ineffectual regulation; a ""captured"" regulator may impose very tight, costly prudential requirements to...

The EU is deliberating the introduction of an explicit ""European mandate"" for financial sector supervisors to supplement national mandates. Suggestions are made on (i) the formulation of a European mandate; (ii) the policy areas to which it should apply; (iii) which institutions should be given...

Recapitalizing banks in a systemic crisis is a complex medium-term process that requires significant government intervention and careful management at both the strategic and individual bank levels. This paper highlights the range of operational and strategic issues to be addressed and the...

The scramble to expand deposit guarantees in Europe in response to recent financial turmoil confirms that the on-going integration of European financial markets requires closer coordination of prudential policies and financial safety nets. We study the optimal design of prudential supervision...

After several years of transition, major weaknesses in the banking and enterprise sectors remain the root cause of low growth. A large share of nonperforming assets in the portfolio of large banks, stemming from losses in the enterprise sector, has been a key impediment to financial sector...

In this paper we construct indices of transparency of monetary and financial policies, based on self-evaluations carried out by 135 IMF member countries in 1999, and use them to identify transparency patterns across different policies and country groups. We find that across all countries,...

This paper proposes a stylized sequencing of banking supervision and bank restructuring measures designed to complement and expedite the adoption of indirect instruments of monetary policy. Appropriate sequencing reflects both operational considerations and macroeconomic effects of structural...

This paper identifies macroeconomic stability, effective bank supervision, and an appropriate sequencing of stabilization, banking regulations, and interest rate policies as common characteristics of the relatively successful experiments in financial sector liberalization. Recent theoretical...

Over the past decade policy makers in Latin America have adopted a number of macroprudential instruments to manage the procyclicality of bank credit dynamics to the private sector and contain systemic risk. Reserve requirements, in particular, have been actively employed. Despite their...

Financial sector reform in the Baltic countries is reviewed in light of the banking crises that emerged during the reform period. It is argued that the crises had their roots in the structural deficiencies specific to planned economies and the financial environment that developed before and...