How banks respond to Central Bank supervisionevidence from Brazil

Resumo

Central Bank supervision is one of the pillars of capital regulation. Based on a unique database built using supervision data from the Central Bank of Brazil, we evaluate the effectiveness of the Central Bank's supervision over banks given the Central Bank's proprietary credit rating and signaling requests for higher capital buffers. We also examine the main determinants of capital buffer management in addition to supervision. We find evidence that (i) Brazilian Central Bank supervision imposes excess capital buffer needs on banks, especially small and midsize banks; (ii) market discipline may play no role in driving capital ratios; and (iii) the business cycle has a negative influence on bank capital cushions, suggesting pro-cyclical capital management. We conclude that supervision plays a major role in markets where market discipline is weak and for smaller banks which act on pro-cyclical way. (C) 2015 Elsevier B.V. All rights reserved.

Ficha do documento

Tipo

Artigo científico

Ano

2015

Instituição

Elsevier Science Inc

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso restrito

DOI

10.1016/j.jfs.2015.05.001

Identificador

oai:repositorio.fgv.br:10438/23483

Palavras-chave

Bank regulationRegulatory capitalAsset riskFinançasBancos centraisPolítica monetária - Brasil