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

Government responses to banking crises are less likely to favor special interest groups when elections are near, voters are better informed about the costs of inefficient government decisions, and governments have multiple veto players. Keefer investigates the political determinants of...