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Can Bank Supervisors Rely on Market Data? A Critical Assessment from a Swiss Perspective

Swiss Journal of Economics and Statistics volume 143, pages 95–132 (2007)Cite this article

Summary

Market data, such as bond spreads or equity price volatility, are a complementary source to bank supervisory information. In Switzerland, meaningful market data are available for a number of banks which constitute a major part of the banking system. Notwithstanding some limitations (biases due to state guarantee for cantonal banks and potential ‘too-big-to-fail’ expectations for big banks) these market data are likely to play a supervisory role in the future. However, once the market expects supervisors to react to market data, these data become endogenous. This may jeopardize the very potential of market data to serve as policy guides.

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Authors and Affiliations

  1. Swiss National Bank, Börsenstrasse 15, 8022, Zurich, Switzerland

    Urs W. Birchler & Matteo Facchinetti

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  1. Urs W. Birchler
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  2. Matteo Facchinetti
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Correspondence to Urs W. Birchler.

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The opinions expressed in this paper do not necessarily reflect those of the Swiss National Bank or its staff. For helpful comments we are indebted to Jeannette Henggeler-Müller, Pierre Monnin and several other colleagues at the Swiss National Bank, as well as to two anonymous referees.

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Birchler, U.W., Facchinetti, M. Can Bank Supervisors Rely on Market Data? A Critical Assessment from a Swiss Perspective. Swiss J Economics Statistics 143, 95–132 (2007). https://doi.org/10.1007/BF03399235

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