This variable takes values between 0 and 14 with higher values indicating a higher degree of official disciplinary power of the supervisory agency in the banking sector. The value is determined by adding 1 if the answer is yes and 0 otherwise, for each one of the following 14 questions from Barth et al. (2001, 2006):
(1) Are there any mechanisms of cease-desist type orders whose infraction leads to automatic imposition of civil and penal sanctions on banks directors and managers?
(2) Can the supervisory agency order directors/management to constitute provisions to cover actual/potential losses?
(3) Can the supervisory agency suspend director’s decision to distribute dividends?
(4) Can the supervisory agency suspend director’s decision to distribute bonuses?
(5) Can the supervisory agency suspend director’s decision to distribute management fees?
(6) Has any such action taken in last five years?
(7) Can any supervisory agency (i.e. bank supervisor, court, deposit insurance agency, bank restructuring or asset management agency, etc.) supersede bank shareholder rights and declare ban insolvent?
(8) Does banking law allow any supervisory agency to suspend some or all ownership rights of a problem bank?
(9) Does the law establish pre-determined levels of solvency deterioration which forces automatic actions such as intervention?
(10) Regarding bank restructuring and reorganization, can supervisory regime or any other governmental agency supersede shareholder rights?
(11) Regarding bank restructuring and reorganization, can supervisory regime or any other governmental agency remove and replace management?
(12) Regarding bank restructuring and reorganization, can supervisory regime or any other governmental agency remove and replace directors?
(13) Regarding bank restructuring and reorganization, can supervisory regime or any other governmental agency forbear certain prudential regulations?
(14) Regarding bank restructuring and reorganization, can supervisory regime or any other governmental agency insure liabilities beyond any explicit deposit insurance scheme?