Study on the Collusive Corruption in Supervision and Examination of Bank Credit

Commercial banks are typical hierarchical organizations, in which the multiple-principal-agent problem exists and induces serious internal collusive corruption. This article analyzes the collusive corruption between the credit supervisor and the credit manager in bank credit activities, through three possible situations of supervision and examination, including honest and costly supervisor alone, corrupt and costless supervisor alone, and the coexistence of both supervisors. The results of this paper indicate that it is still necessary for the internal supervisor to provide the supervision even though he could collude. Meanwhile, it is inefficient for the bank only depending on the costly external supervisor. Finally, some suggestions are also proposed.