Given current debates on the future direction of regulatory design, the first objective of this paper is to contextualise the issues surrounding bank market discipline. Accordingly, the paper raises awareness of the current key themes within incentive-based regulatory design and analyses the...

The academic literature has regularly argued that market discipline can support regulatory authority discipline to monitor banking sector stability. This includes, amongst other things, using forward-looking market prices to identify those credit institutions that are most at risk of failure....