Optimal Preventive Bank Supervision: Combining Random Audits and Continuous Intervention
type: Dataset
description: Early regulator interventions into problem banks is one of the key suggestions of Basel II. However, no guidance is given on their design. To fill this gap, we outline an incentive-based preventive supervision strategy that eliminates bad asset management in banks. Two supervision techniques are combined: continuous regulator intervention and random audits. Random audit technologies differ as to quality and cost. Our design ensures good management without excessive supervision costs, through a gradual adjustment of supervision effort to the bank's financial health. We also consider preventive supervision in a setting where audits can be delegated to an independent audit agency, showing how to induce agency compliance with regulatory instructions in the least costly way.
issued: 2026-05-14T09:06:15.264310
language: en
modified: 2026-05-14T09:06:15.264317
contact point: Organization
  fn: CCSD
keyword: banking-supervision
keyword: delegation
keyword: incentives
keyword: infoeu-reposemanticspreprint
keyword: moral-hazard
keyword: preprints-working-papers-
keyword: random-audit
keyword: shsecohumanities-and-social-scienceseconomics-and-finance
landing page: https://shs.hal.science/halshs-00790464

Optimal Preventive Bank Supervision: Combining Random Audits and Continuous Intervention
type: Distribution
format: HTML
issued: 2026-05-14T09:06:15.270833
modified: 2026-05-14T09:06:15.245090
access URL: https://shs.hal.science/halshs-00790464

test_moissonnage_selune
type: Agent