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...