Measuring the effects of financial sector supervision

Financial supervisors are increasingly expected to be able to demonstrate the effectiveness of their actions. In practice, however, this proves challenging as it is difficult to prove the causality between supervisory actions and observed effects. In this paper we describe four lessons that help financial supervisors measure the effects of their actions. We also provide suggestions for the development of specific performance indicators to measure the effectiveness of financial supervision.

Keywords: financial supervision, effectiveness, performance indicators.

Working paper no. 388