This paper examines the market-discipline and supervisory-process "pillars" of the Basel II framework. It reviews the key features of these Basel II pillars and discusses and evaluates associated conceptual issues in relation to theoretical predictions and empirical findings in the academic...

This brief evaluates the supervisory-process and market-discipline pillars of the Basel II bank regulatory framework. It reviews and critiques their fundamental features and reaches three conclusions. First, the supervisory-process pillar provides too much scope for supervisory discretion and...

Since passage of the Economic Stabilization Act of 2008, the government has been explicitly and implicitly regulating the compensation of top managers at a number of U.S. banks. In addition, bank regulators have added evaluations of bank management compensation packages to the list of factors...

We propose a theory of 'regulatory endogenous sunk costs' (RESC), in which a captured regulator raises minimum quality standards when market size increases in order to protect incumbent firms. Our RESC theory's predictions that market size is unrelated to industry concentration and positively...