A Stiglerian view on banking supervision

According to Stigler's capture theory regulation often follows the preferences of producers. Therefore, the interests of the financial industry might be a major driving force for the ongoing supervisory reform debate. This paper identifies possible interests of the regulated industries: Either they might favour strict supervision to create barriers for entry. Or they might use their political influence to press for a lax and low-cost supervisory system. Our empirical results indicate that the private interest view on banking regulation is indeed relevant and that the data is more compatible with a "preference for laxity" than with a "barriers to entry" view.