Supervisors sometimes have to manage both the micro- and macro-prudential dimensions of bank stability. These may either conflict or complement each other. We analyze prudential supervision by the Central Bank of Russia (CBR). We find evidence of micro-prudential concerns, measured as the rule-based enforcement of bank standards. Macro-prudential concerns are also documented: Banks in concentrated bank markets, large banks, money center banks and large deposit banks are less likely to face license withdrawal. Further, the CBR is reluctant to withdraw licenses when there are "too many banks to fail." Finally, macroprudential concerns induce regulatory forbearance, revealing conflicts with micro-prudential objectives. Journal of Comparative Economics 35 (3) (2007) 630-657. Research Department, Sveriges Riksbank, SE103 37 Stockholm, Sweden; CERISE, Ghent University, Tweekerkenstraat 2, BE-9000 Ghent, Belgium; WDI, University of Michigan, USA. (C) 2007 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.
