Prudential Regulation and Supervision of the Banking Sector and Banking Crises: A Cross Country Empiricial Investigation

The main purpose in this study is to see empirically whether there really exists a cle-ar association between weaknesses in the regulation and supervision of the banking sector and banking crises. Test results indicate that capital regulations are a major fac-tor in the prevention of crises, giving important support to the propositions towards ensuring higher capital requirements. However, tighter capital regulations do not se-em to mitigate the negative impact of moral hazard problem generated by generous deposit insurance system. While inflation has a significant role in the generation of cri-sis, its significance weakens to a major extent, when accompanied with regulatory and supervisory factors. Hence, the significance of regulatory and supervisory framework of the banking system is once more justified