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Can bank supervisors rely on market data? A critical assessment from a Swiss perspective

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  • Urs W. Birchler
  • Matteo Facchinetti

Abstract

Market data, such as bond spreads or equity price volatility, are a complementary source to bank supervisory information. In Switzerland, meaningful market data are available for a number of banks which constitute a major part of the banking system. Notwithstanding some limitations (biases due to state guarantee for cantonal banks and potential "too-big-to-fail" expectations for big banks) these market data are likely to play a supervisory role in the future. However, once the market expects supervisors to react to market data, these data become endogenous. This may jeopardize the very potential of market data to serve as policy guides.

Suggested Citation

  • Urs W. Birchler & Matteo Facchinetti, 2006. "Can bank supervisors rely on market data? A critical assessment from a Swiss perspective," Working Papers 2006-08, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2006-08
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    File URL: https://www.snb.ch/en/publications/research/working-papers/2006/working_paper_2006_08
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    Cited by:

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    2. Elyas Elyasiani & Jason Keegan, 2017. "Market Discipline in the Secondary Bond Market: The Case of Systemically Important Banks," Working Papers 17-5, Federal Reserve Bank of Philadelphia.
    3. Mark J. Flannery, 2016. "Stabilizing Large Financial Institutions with Contingent Capital Certificates," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-26, June.
    4. Zhang, Zhichao & Song, Wei & Sun, Xin & Shi, Nan, 2014. "Subordinated debt as instrument of market discipline: Risk sensitivity of sub-debt yield spreads in UK banking," Journal of Economics and Business, Elsevier, vol. 73(C), pages 1-21.
    5. Pablos Nuevo, Irene, 2019. "Has the new bail-in framework increased the yield spread between subordinated and senior bonds?," Working Paper Series 2317, European Central Bank.
    6. Pascal Böni & Heinz Zimmermann, 2024. "The Credit Suisse bailout in hindsight: not a bitter pill to swallow, but a case to follow," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 38(1), pages 1-35, March.

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    More about this item

    Keywords

    bank-supervision;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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