Measuring the quality of bank regulation and supervision with an application to transition economies

This study develops a methodology to evaluate the quality of the legal aspect of bank regulation and supervision (RS). We use both the Basle guidelines and the letter of banking laws to form an extensive set of criteria to evaluate banking laws. As an application, we provide measures of RS for 23 transition economies. Our measurements indicate that legal banking reforms in Poland, Hungary, and Estonia have been more ambitious than the rest of the countries in transition. Controlling for various other relevant factors, empirical evidence reveals a significant positive relationship between RS and real GDP growth in transition economies.