The regulatory and supervisory practices most effective in promoting good performance and stability in the banking sector are those that force accurate information disclosure, empower private sector monitoring of banks, and foster incentives for private agents to exert corporate control

For optimal regulation, one size does not fit all. Differences in countries' informational and contracting environments (in the transparency of information, in protection for counterparties, and in political accountability), influence the design of their financial safety nets and their...

It is difficult to design and implement an effective safety net for banks, because overgenerous protection of banks may introduce a risk-enhancing moral hazard and destabilize the very system it is meant to protect. The safety net that policymakers design must provide the right mix of market and...

Economies with better developed financial sectors have a comparative advantage in manufacturing industries. A two-sector model shows the sector with large scale economies profiting more than the other from a well-developed financial sector. In countries with higher levels of financial...

A country's level of financial development and the legal environment in which financial intermediaries and markets operate critically influence economic development. In countries whose financial sectors are more fully developed and whose legal systems protect the rights of outside investors,...