James R. Barth

Bio: James R. Barth is an academic researcher from Auburn University. The author has contributed to research in topics: Bank regulation & Deposit insurance. The author has an hindex of 44, co-authored 245 publications receiving 12916 citations. Previous affiliations of James R. Barth include University of Alabama & Federal Home Loan Bank Board.

Rethinking Bank Regulation: Till Angels Govern

Abstract: 1. Introduction: 1.A Motivation 1.B Objectives and contributions 1.C Key findings: a brief synopsis 1.D Guide to the book 2. Contrasting approaches to bank regulation: 2.A Two approaches to bank regulation: 2.A.1 Public interest approach 2.A.2 Private interest view of regulation 2.B Bank regulation: how 2.C The Basel Committee and regulatory convergence 2.D Conclusion 3. How are banks regulated and supervised around the world?: 3.A Overview 3.B Structure, scope and independence of regulation and supervision 3.C What is a 'bank'? 3.D Entry into banking, capital requirements and supervisory powers 3.E Explicit deposit insurance schemes 3.F Private monitoring and external governance 3.G Does bank ownership type affect the choice of regulations and supervisory practices? 3.H Forces for greater harmonization of regulation and supervision among countries 4. What works best: 4.A Goals and boundaries 4.B Bank regulation and supervision and bank development 4.C Bank supervision, regulation, and stability 4.D Bank supervision, regulation, and bank efficiency 4.E Bank supervision, regulation, and bank lending 4.F Supervision, regulation, and bank governance 4.G Summary of results 5. Choosing bank regulations 5.A Recap and motivation 5.B Motivating example: Mexico and the United States 5.C Conceptual framework 5.D Empirical framework and data 5.E Summary remarks 6. Rethinking bank regulation: 6.A Approach and context 6.B Lessons and implications.

Bank Regulation and Supervision: What Works Best?

Abstract: The authors draw on their new database on bank regulation and supervision in 107 countries to assess different governmental approaches to bank regulation and supervision and evaluate the efficacy of different regulatory and supervisory policies. First, the authors assess two broad and competing theories of government regulation: the helping-hand approach, according to which governments regulate to correct market failures, and the grabbing-hand approach, according to which governments regulate to support political constituencies. Second, they assess the effect of an extensive array of regulatory and supervisory policies on the development and fragility of the banking sector. These policies include the following: Regulations on bank activities and the mixing of banking and commerce. Regulations on entry by domestic and foreign banks. Regulations on capital adequacy. Design features of deposit insurance systems. Supervisory power, independence, and resources; stringency of loan classification; provisioning standards; diversification guidelines; and powers to take prompt corrective action. Regulations governing information disclosure and fostering private sector monitoring of banks. Government ownership of banks. The results raise a cautionary flag with regard to reform strategies that place excessive reliance on a country's adherence to an extensive checklist of regulatory and supervisory practices that involve direct government oversight of and restrictions on banks. The findings, which are much more consistent with the grabbing-hand view of regulation than with the helping-hand view, suggest that 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.

The Regulation and Supervision of Banks Around the World: A New Database

Abstract: This new and comprehensive database on the regulation and supervision of banks in 107 countries should better inform advice about bank regulation and supervision and lower the marginal cost of empirical research.International consultants on bank regulation and supervision for developing countries often base their advice on how their home country does things, for lack of information on practice in other countries. Recommendations for reform have tended to be shaped by bias rather than facts.To better inform advice about bank regulation and supervision and to lower the marginal cost of empirical research, Barth, Caprio, and Levine present and discuss a new and comprehensive database on the regulation and supervision of banks in 107 countries. The data, based on surveys sent to national bank regulatory and supervisory authorities, are now available to researchers and policymakers around the world.The data cover such aspects of banking as entry requirements, ownership restrictions, capital requirements, activity restrictions, external auditing requirements, characteristics of deposit insurance schemes, loan classification and provisioning requirements, accounting and disclosure requirements, troubled bank resolution actions, and (uniquely) the quality of supervisory personnel and their actions.The database permits users to learn how banks are currently regulated and supervised, and about bank structures and deposit insurance schemes, for a broad cross-section of countries.In addition to describing the data, Barth, Caprio, and Levine show how variables may be grouped and aggregated. They also show some simple correlations among selected variables.In a companion paper ("Bank Regulation and Supervision: What Works Best") studying the relationship between differences in bank regulation and supervision and bank performance and stability, they conclude that:- Countries with policies that promote private monitoring of banks have better bank performance and more stability. Countries with more generous deposit insurance schemes tend to have poorer bank performance and more bank fragility.- Diversification of income streams and loan portfolios - by not restricting bank activities - also tends to improve performance and stability. (This works best when an active securities market exists.) Countries in which banks are encouraged to diversify their portfolios domestically and internationally suffer fewer crises.This paper - a product of Finance, Development Research Group, and the Financial Sector Strategy and Policy Department - is part of a larger effort in the Bank to compile data on financial regulation and supervision and the advise countries on what works best. The study was funded by the Bank's Research Support Budget under the research project "Bank Regulation and Supervision: What Works and What Does Not."

Banking Systems Around the Globe : Do Regulation and Ownership Affect the Performance and Stability?

Abstract: The authors report cross-country data on commercial bank regulation and ownership in more than 60 countries. They evaluate the links between different regulatory/ownership practices in those countries and both financial sector performance and banking system stability. They document substantial variation in response to these questions: Should it be public policy to limit the powers of commercial banks to engage in securities, insurance, and real estate activities? Should the mixing of banking and commerce be restricted by regulating commercial bank's ownership of non-financial firms and non-financial firms' ownership of commercial banks? Should states own commercial banks, or should those banks be privatized? They find: 1) There is no reliable statistical relationship between restrictions on commercial banks' ability to engage in securities, insurance, and real estate transactions and how well-developed the banking sector, how well-developed securities markets and non-bank financial intermediaries are, or the degree of industrial competition. Based on the evidence, it is difficult to argue confidently that restricting commercial banking activities benefits-or harms-the development of financial and securities markets or industrial competition. 2) There are no positive effects from mixing banking and commerce. 3) Countries that more tightly restrict and regulate the securities activities of commercial banks are substantially more likely to suffer a major banking crisis. Countries whose national regulations inhibit banks' ability to engage in securities underwriting, brokering, and dealing--and all aspects of the mutual fund business--tend to have more fragile financial systems. 4) The mixing of banking and commerce is associated with less financial stability. The evidence does not support admonitions to restrict the mixing of banking and commerce because mixing them will increase financial fragility. 5) On average, greater state ownership of banks tends to be associated with more poorly developed banks, nonbanks, and stock markets and more poorly functioning financial systems.

Financial Intermediation and Growth: Causality and Causes

Abstract: Legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. Levine, Loayza, and Beck evaluate: Whether the level of development of financial intermediaries exerts a casual influence on economic growth. Whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental-variable procedures and recent dynamic panel techniques, they find that development of financial intermediaries exerts a large causal impact on growth. The data also show that cross-country differences in legal and accounting systems help determine differences in financial development. Together, these findings suggest that legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the links between the financial system and economic growth. Thorsten Beck may be contacted at tbeck@worldbank.org.

The Economic Consequences of Legal Origins

Abstract: In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.