Opportunity Costs of Banking Supervision

Abstract

This paper focuses on the definition of banking supervision and indicators of effort and effect of banking supervision. The idea of the importance of measuring the effectiveness of supervision through cost-benefit analysis has been profiled and the categories of costs of supervision have been categorized according to several authors. In addition to direct costs related to personnel, remuneration, technical sources, supervision entails many indirect costs, including compliance and opportunity costs. According to some authors, the ratio of indirect to direct costs is 4:1. This is also why the task of quantifying the effectiveness of banking supervision is so difficult. In the article we tried to penalize overliquidity and overcapitalization as an opportunity cost of supervision in Rep. The period 2008-2024 was analyzed. During this period many events occurred that destabilized the banking system, ranging from international financial crisis, bank failures, pandemics, war that brought strong inflationary pressures. Therefore, a broader analysis of the reasons behind the banks' decision to go far beyond the minimum requirements regulated by the National Bank is needed. UDC: 657.471:336.71.078.3(478); JEL: G21