Rethinking Bank Regulation: Till Angels Govern
Jan 01, 2006

James R. Barth, Gerard Caprio Jr. and Ross Levine

This volume assembles and presents a new database on bank regulation in over 150 countries (included also on CD). It offers the first comprehensive cross-country assessment of the impact of bank regulation on the operation of banks, and assesses the validity of the Basel Committee's influential approach to bank regulation.

The authors also provide an empirical evaluation of the historic debate about the proper role of government in the economy by studying bank regulation and analyzes the role of politics in determining regulatory approaches to banking.

The data indicate that restrictions on the entry of new banks, government ownership of banks and restrictions on bank activities hurt banking-system performance. The authors find that domestic political factors shape both regulations and their effectiveness.

Their work involves more than six years of research and data collection, as well as analyzing the results.

The authors are James Barth, a Senior Fellow at the Milken Institute and Lowder Eminent Scholar in Finance at Auburn University; Gerard Caprio, Jr., a Professor of Economics at Williams College and former director for policy at the World Bank; and Ross Levine, a Professor of Economics at Brown University.

Read a review of the book from The Economist.

Read a review of the book from Federal Reserve Bank of Minneapolis.

Praise for the book:

"Rethinking Bank Regulation" is a thought-provoking study, attacking the current practice of bank regulation and supervision. Using data from more than 150 countries, the authors conclude that strengthening capital standards or empowering supervisors does not boost bank efficiency, reduce corruption in lending, or lower banking system fragility. They urge reforms that would emphasize greater disclosure and transparency in the banking sector as well as better private sector monitoring of banks. This is a must read for all those interested in banking sector reform. It will also be fascinating for students of political economy." -- Raghuram Rajan, International Monetary Fund

"This well-written and compelling book shakes the conventional wisdom about banking regulation to its foundations. It is also a model of how to do judicious analysis of an important policy question, then apply it to give real world recommendations. Nobody involved with financial and banking policies, or for that matter with economic policy in developing countries in general, can afford NOT to read this book." -- William Easterly, New York University