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Why Are There so Many Banking Crises?

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  • Jean-Charles Rochet

Abstract

The last 25 years have seen an impressive number of banking crises all over the world. These crises have renewed interest of economic research on the causes of fragility of banks and the possible remedies to it. The justifications and organisation of public intervention in the banking sector have also been put into question. This article builds on this recent research in order to understand better the causes of banking crises and offer policy guidelines for reform of regulatory and supervisory systems. The main conclusions are: •Although many banking crises have been initiated by financial deregulation and globalization, these crises were largely amplified by political interference. •Supervision systems face a fundamental commitment problem, analogous to the time consistency problem confronted by monetary policy. •The key to successful reform is independence and accountability of banking supervisors. (JEL E58,G21)

Suggested Citation

  • Jean-Charles Rochet, 2003. "Why Are There so Many Banking Crises?," CESifo Economic Studies, CESifo Group, vol. 49(2), pages 141-155.
    • Handle: RePEc:oup:cesifo:v:49:y:2003:i:2:p:141-155.
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    File URL: http://hdl.handle.net/10.1093/cesifo/49.2.141
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    Citations

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    Cited by:

    1. Georges Dionne, 2003. "The Foundations of Banks' Risk Regulation: a Review of the Literature," Cahiers de recherche 0346, CIRPEE.
    2. Donato Masciandaro & Marc Quintyn, 2013. "The Evolution of Financial Supervision: the Continuing Search for the Holy Grail," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 8, pages 263-318, SUERF - The European Money and Finance Forum.
    3. Franklin Allen & Ana Babus & Elena Carletti, 2009. "Financial Crises: Theory and Evidence," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 97-116, November.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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