نظم و انضباط بازار در مقررات بانکی بین المللی: نگه داشتن سطح زمین بازی

The focus of this article is the debt market as a powerful disciplinarian source for large and complex banking organizations around the world. We empirically study the interactions between reinforcing banks’ market discipline and preserving a level playing field in international banking. Our approach consists of conducting cross-country comparisons of the secondary market prices sensitivity to market measures of bank risk (traditional and financial strength ratings). The results are generally consistent with the market discipline paradigm. However, much progress still needs to be made (especially in Japan and certain European countries) in order to make the level playing field principle compatible with the reinforcement of market discipline on an international level.

Recently, the international authorities have reserved a unique place for market discipline in the reform proposals of banking regulation and supervision around the world. For instance, the third Pillar of the new Basel Capital Accord (Basel II) explicitly highlights the potential benefits from integrating the market forces in the traditional safety nets (see the revised framework, BIS, 2004). The Basel Committee approach consists of strengthening market discipline by proposing a set of requirements and recommendations concerning the public disclosure practices for internationally active banks. However, even if transparency is in fact a necessary condition for effective market discipline, nothing can guarantee that it is also a sufficient one. The requirements set up in the third Pillar of Basel II would have the expected positive impact on bank soundness, only if the market participants act in a manner consistent with financial stability. Unfortunately, in most cases, such a behavior is not spontaneous. The exclusive focus of the Basel Committee on transparency issues renders the concept of market discipline very ambiguous.1 This partial picture of market discipline makes the third Pillar the most fragile of the three key elements of Basel II. The mutual reinforcement, as well as the rebalance of the three pillars, becomes under these circumstances all the more problematic.

The objective of this paper is to empirically study the articulation between two fundamental principles that are nowadays central issues in international banking regulation. On one hand, the level playing field principle, put forward since the adoption of the first Basel Capital Accord in July 1988, postulates that the competition between internationally active banks must be fair. This principle is maintained in the new Basel Accord, which will come into effect in 2007. On the other hand, the unprecedented complexity of banking activities and the systematic use of internal credit risk models call for promoting market discipline as an additional and more flexible tool of banking regulation. We address this issue by regressing the secondary market spreads on market measures of bank risk (traditional and financial strength ratings). This approach allows us to identify the main problems raised by the use of market signals for supervisory purposes. Our final sample includes 95 debt instruments (36 being subordinated unsecured) issued by large banking organizations headquartered in Canada, Europe, Japan, and the US. The analyzed period covers 8 years from 1995 to 2002. The main results obtained by applying the OLS pooled and within method can be summarized as follows.