This paper uses a new database on bank regulation and supervision in 107 countries to assess the relationship between specific regulatory and supervisory practices and banking-sector development, efficiency, and fragility. It examines regulatory restrictions on bank activities and the mixing of banking and commerce, regulations on domestic and foreign bank entry, capital adequacy regulations, deposit insurance system design, supervisory power, independence, and resources, loan classification stringency, provisioning standards, and diversification guidelines, regulations fostering information disclosure and private-sector monitoring of banks, and government ownership. The results suggest that policies relying on guidelines that force accurate information disclosure, empower private-sector corporate control of banks, and foster incentives for private agents to exert corporate control work best to promote bank development, performance, and stability. The paper provides empirical evidence on each of the three pillars associated with the Basel II Capital Accord. Economic theory provides conflicting predictions about the effects of these regulations and supervisory practices on bank development, performance, and stability. Some argue for restricting banks from participating in securities, insurance, and real estate activities or from owning nonfinancial firms, while others argue that fewer restrictions allow banks to exploit economies of scale and scope. The paper examines the relationship between bank regulation and supervision and bank development, performance, and stability using a broad cross-section of countries. It finds that greater government ownership is associated with policies that restrict bank activities, reduce bank competition, and impede private-sector corporate control of banks. The paper also finds that countries with more open, private-sector-oriented approaches to regulation and supervision tend to have greater bank development, better performance, and more stable banks. The results are consistent with the view that government corruption tends to be higher in countries where the government plays a large role in supervising, regulating, and owning banks. The paper provides regression results showing that restrictions on bank activities are negatively associated with bank development, but not with net interest margins or overhead costs. The results also indicate that restricting bank activities is associated with an increase in the likelihood of suffering a major crisis. The paper concludes that policies that rely on guidelines that force accurate information disclosure, empower private-sector corporate control of banks, and foster incentives for private agents to exert corporate control work best to promote bank development, performance, and stability.This paper uses a new database on bank regulation and supervision in 107 countries to assess the relationship between specific regulatory and supervisory practices and banking-sector development, efficiency, and fragility. It examines regulatory restrictions on bank activities and the mixing of banking and commerce, regulations on domestic and foreign bank entry, capital adequacy regulations, deposit insurance system design, supervisory power, independence, and resources, loan classification stringency, provisioning standards, and diversification guidelines, regulations fostering information disclosure and private-sector monitoring of banks, and government ownership. The results suggest that policies relying on guidelines that force accurate information disclosure, empower private-sector corporate control of banks, and foster incentives for private agents to exert corporate control work best to promote bank development, performance, and stability. The paper provides empirical evidence on each of the three pillars associated with the Basel II Capital Accord. Economic theory provides conflicting predictions about the effects of these regulations and supervisory practices on bank development, performance, and stability. Some argue for restricting banks from participating in securities, insurance, and real estate activities or from owning nonfinancial firms, while others argue that fewer restrictions allow banks to exploit economies of scale and scope. The paper examines the relationship between bank regulation and supervision and bank development, performance, and stability using a broad cross-section of countries. It finds that greater government ownership is associated with policies that restrict bank activities, reduce bank competition, and impede private-sector corporate control of banks. The paper also finds that countries with more open, private-sector-oriented approaches to regulation and supervision tend to have greater bank development, better performance, and more stable banks. The results are consistent with the view that government corruption tends to be higher in countries where the government plays a large role in supervising, regulating, and owning banks. The paper provides regression results showing that restrictions on bank activities are negatively associated with bank development, but not with net interest margins or overhead costs. The results also indicate that restricting bank activities is associated with an increase in the likelihood of suffering a major crisis. The paper concludes that policies that rely on guidelines that force accurate information disclosure, empower private-sector corporate control of banks, and foster incentives for private agents to exert corporate control work best to promote bank development, performance, and stability.