Data Set - Global Banking Regulation

Methodology

This database builds on surveys sponsored by the World Bank that were released in 1999, 2003, 2007 and 2012. Overall, the surveys cover 180 countries. Survey I, completed in 1999, covered 118 countries and included over 300 questions. Survey II, released in 2002, included 151 countries' responses to over 400 questions. Survey III, released in 2007, provided information on the banking policies of more than 142 countries. Survey IV, released in 2012, polled 125 countries. To give meaning to the raw survey data, the authors aggregated the responses and constructed 51 indexes in 10 categories.

Indices are calculated in two ways:
  1. 'All Index': calculated only if responses to all corresponding questions are available (including fill-ins described in rule 3 below.)
  2. 'All Average Scaled Index': calculated as an average of the available question responses multiplied by the total number of questions asked for in the index, if at least 50% of the answers are available and at least three or more questions are used in any particular index.

General coding rules are listed below with exceptions noted:
  1. All raw data was converted into quantitative measures based on the formulae in 'Index Overview'.
  2. Missing responses are indicated as "n.a." (not available), while responses to questions that don't apply are coded as "N/A" (not applicable).
  3. To fill in blanks, if there are responses to a question in at least two surveys and these responses are the same, the missing two (or one) is filled in as the same (except in Survey IV, see rule 4). These fill-ins are highlighted in yellow.
  4. Missing responses for Survey IV are never filled in based on responses to earlier surveys, since the financial crisis that emerged in 2007 may have led to many regulatory changes in countries.
  5. Missing responses from countries of three groups with uniform bank regulations and supervisory practices (Eastern Caribbean Currency Union, West African Monetary Union, and Central African Economic and Monetary Community shown in "Groups with uniform regulations") are filled in based on responses from other countries in the same groups.
  6. In all other ambiguous cases in which changes were made, additional information from published sources, online documents, and official releases were used to make those changes.
Bank Activity Regulatory Variables
Securities Activities The extent to which banks may engage in underwriting, brokering and dealing in securities, and all aspects of the mutual fund industry 1—4 (Higher values indicate more restrictive)
Insurance Activities The extent to which banks may engage in insurance underwriting and selling 1—4 (Higher values indicate more restrictive)
Real Estate Activities The extent to which banks may engage in real estate investment, development and management 1—4 (Higher values indicate more restrictive)
Overall Restrictions on Banking Activities Securities Activities + Insurance Activities + Real Estate Activities 1—4 (Higher values indicate more restrictive)
Financial Conglomerate Variables
Bank Owning Nonfinancial Firms The extent to which banks may own and control nonfinancial firms 1—4 (Higher values indicate more restrictive)
Nonfinancial Firms Owning Banks The extent to which nonfinancial firms may own and control banks 1—4 (Higher values indicate more restrictive)
Nonbank Financial Firms Owning Banks The extent to which nonbank financial firms may own and control banks 1—4 (Higher values indicate more restrictive)
Overall Financial Conglomerates Restrictiveness Bank Owning Nonfinancial Firms + Nonfinancial Firms Owning Banks + Nonbank Financial Firms Owning Banks 3—12 (Higher values indicate more restrictive)
Competition Regulatory Variables
Limitations on Foreign Bank Entry/Ownership Whether foreign banks may own domestic banks and whether foreign banks may enter a country's banking industry 0—4 (Lower values indicate greater stringency)
Entry into Banking Requirements Whether various types of legal submissions are required to obtain a banking license 0—8 (Higher values indicate greater stringency)
Fraction of Entry Applications Denied The degree to which applications to enter banking are denied 0—1 (Percent, 0-100%)
Domestic Denials The degree to which domestic applications to enter banking are denied 0—1 (Percent, 0-100%)
Foreign Denials The degree to which foreign applications to enter banking are denied 0—1 (Percent, 0-100%)
Capital Regulatory Variables
Overall Capital Stringency Whether the capital requirement reflects certain risk elements and deducts certain market value losses from capital before minimum capital adequacy is determined 0—7 (Higher values indicate greater stringency)
Initial Capital Stringency Whether certain funds may be used to initially capitalize a bank and whether they are officially 0—3 (Higher values indicate greater stringency)
Capital Regulatory Index Overall Capital Stringency + Initial Capital Stringency 0—10 (Higher values indicate greater stringency)
Official Supervisory Action Variables
Official Supervisory Power Whether the supervisory authorities have the authority to take specific actions to prevent and correct problems 0—14 (Higher values indicate greater power)
Prompt Corrective Power Whether a law establishes predetermined levels of bank solvency deterioration that force automatic actions, such as intervention 0—6 (Higher values indicate more promptness in responding to problems)
Restructuring Power Whether the supervisory authorities have the power to restructure and reorganize a troubled bank 0—6 (Higher values indicate greater restructuring power)
Declaring Insolvency Power Whether the supervisory authorities have the power to declare a deeply troubled bank insolvent 0—4 (Higher values indicate greater power)
Supervisory Forbearance Discretion Whether the supervisory authorities may engage in forbearance when confronted with violations of laws and regulations or other imprudent behavior 0—4 (Higher values indicate less supervisory discretion)
Court Involvement The degree to which the court dominates the supervisory authority 0—3 (Higher values indicate less supervisory discretion)
Loan Classification Stringency The classification of loans in arrears as sub-standard, doubtful and loss Pure number (Minimum number of days beyond which a loan in arrears must be classified as substandard, doubtful, then loss)
Provisioning Stringency The minimum required provisions as loans become sub-standard, doubtful and loss Pure number (Sum of the minimum required provisioning percentages when a loan is successfully classified as substandard, doubtful, and loss)
Diversification Index Whether there are explicit, verifiable, quantifiable guidelines for asset diversification, and banks are allowed to make loans abroad 0—2 (Higher values indicate more diversification)
Official Supervisory Structural Variables
Supervisor Tenure The average tenure of a professional bank supervisor Pure number (Years)
Independence of Supervisory Authority-Political The degree to which the supervisory authority is independent within the government from political influence

0—1 (Higher values indicate greater independence)
Independence of Supervisory Authority-Bank The degree to which the supervisory authority is protected by the legal system from the banking industry

0—1 (Higher values indicate greater independence)
Independence of Supervisory Authority-Fixed Term The degree to which the supervisory authority is able to make decisions independently of political considerations

0—1 (Higher values indicate greater independence)
Independence of Supervisory Authority-Overall The degree to which the supervisory authority is independent from the government and legally protected from the banking industry

0—3 (Higher values indicate greater independence)
Multiple Supervisor This variable indicates whether there is a single official regulatory of banks, or whether multiple supervisor share responsibility for supervising the nation's banks 0—1 (Yes = 1, No = 0)
Single vs. Multiple Financial Supervisory Authority This variable indicates whether or not there is a single financial supervisory authority 0—1 (Yes = 1, No = 0)
Private Monitoring Variables
Certified Audit Required Whether there is a compulsory external audit by a licensed or certified auditor 0—1 (Yes = 1, No = 0)
Percent of 10 Biggest Banks Rated by International Rating Agencies The percentage of the top ten banks that are rated by international rating agencies Pure number (Percent, 0-100%)
Percent of 10 Biggest Banks Rated by Domestic Rating Agencies The percentage of the top ten banks that are rated by domestic rating agencies Pure number (Percent, 0-100%)
No Explicit Deposit Insurance Scheme Whether there is an explicit deposit insurance scheme and whether depositors were fully compensated the last time a bank failed 0—1 (Higher values indicate more private supervision)
Bank Accounting Whether the income statement includes accrued or unpaid interest or principal on nonperforming loans and whether banks are required to produce consolidated financial statements 0—4 (Higher values indicate more informative bank accounts)
Private Monitoring Index Measures whether there incentives/ability for the private monitoring of firms, with higher values indicating more private monitoring 0—12 (Higher values indicate more private oversight)
Deposit Insurance Scheme Variables
Deposit Insurer Power Whether the deposit insurance authority has the authority to make the decision to intervene in a bank, take legal action against bank directors or officials, and has ever taken any legal action against bank directors or officers 0—4 (Higher values indicate more power)
Deposit Insurance Funds-to-Total Bank Asset The size of the deposit insurance fund relative to total bank assets Pure number (Ratio)
Funding with Insured Deposits The degree to which moral hazard exists Pure number (Percent; higher values indicate more moral hazard)
Various Factors Mitigating Moral Hazard Degree to which actions taken to mitigate moral hazard 0—3 (Higher values indicate greater mitigation of moral hazard)
Market Structure Indicators (from Journal of Financial Intermediation, JFI)
Bank Concentration (Deposit) The degree of concentration of deposits in the 5 largest banks Pure number (Percent)
Bank Concentration (Asset) The degree of concentration of assets in the 5 largest banks Pure number (Percent)
Foreign-Owned Banks The extent to which the banking system's assets are foreign owned Pure number (Percent)
Government-Owned Banks The extent to which the banking system's assets are government owned Pure number (Percent)
External Governance Variables (from Rethinking Bank Regulation book)
Strength of External Audit The effectiveness of external audits of banks 0—7 (Higher values indicate better strength of external audit)
Financial Statement Transparency The transparency of bank financial statements practices 0—6 (Higher values indicate better transparency)
Accounting Practices The type of accounting practices used 0—1 (Higher values indicate better practices)
External Ratings and Creditor Monitoring The evaluations by external rating agencies and incentives for creditors of the bank to monitor bank performance 0—5 (Higher values indicate better credit monitoring)
External Governance Index Strength of External Audit + Financial Statement Transparency + Accounting Practices + External Ratings and Creditor Monitoring + External Governance Index 0—19 (Higher values indicate better corporate governance)