Aligning financial supervisory structures with country needs / edited by Jeffrey Carmichael, Alexander Fleming, David T. Llewellyn.

Format:

Book

Contributor:

Carmichael, Jeffrey.

Fleming, Alexander.

Llewellyn, David T.

World Bank Institute.

Series:

WBI learning resources series

Language:

English

Subjects (All):

International finance--Congresses.

International finance.

Monetary policy--Congresses.

Monetary policy.

Banks and banking, Central--Congresses.

Banks and banking, Central.

Genre:

Conference papers and proceedings.

Physical Description:

xviii, 263 pages : illustrations ; 23 cm.

Place of Publication:

Washington, D.C. : World Bank Institute, [2004]

Summary:

The Latin American Development Forum promotes debate and disseminates knowledge and analysis on economic and social development issues in Latin America and the Caribbean. The Institutional Sponsors of this series are the World Bank, United Nations Economic Commission for Latin America and the Caribbean (ECLAC), and Inter-American Development Bank (IADB). The financial sector industry has undergone major changes in recent years. Technological innovation, deregulation, and liberalization are changing the context in which financial supervisors operate. Selecting the right supervisory model is an important strategic decision for a government or financial authority, and should be done in a way that fits with the institutional setting and resource capacity of the particular country. While an increasing number of countries are planning to integrate financial supervisory agencies, others have adopted a partially integrated supervisory structure, and many maintain completely separate agencies.

Contents:

Chapter 1 Summary of the Discussion / Jeffrey Carmichael 1

Choosing an Appropriate Regulatory Structure 2

Managing the Transition 6

Making Structures Work 9

Chapter 2 Institutional Structure of Financial Regulation and Supervision: The Basic Issues / David T. Llewellyn 17

Regulation, the Financial System, and the Economy 22

Universal Functions 24

Origin of the Debate 30

The Importance of Institutional Structure 34

A Regulatory Matrix 36

Alternative Frameworks 40

Integrated Versus Multiple Agencies 43

The Case for Integration 43

The Potential Hazards of Integrated Agencies 47

The Mega Regulator-Supervisor 52

Twin Peaks Model 56

The Role of the Central Bank 58

International Experience 68

Corporate Governance Issues 81

Appendix Financial Conglomerates 85

Chapter 3 Making the Structural Decision 93

Australia's Approach to Regulatory Reform / Jeffrey Carmichael 93

Setting Up the Inquiry 94

The Evidence Produced by the Inquiry 96

Inefficiencies in the Financial System 96

The Changing Financial Landscape 97

Regulatory Implications 100

From Implications to Objectives 103

Philosophical Framework 104

Anticompetitive Behavior 105

Market Misconduct 105

Asymmetric Information 106

Systemic Instability 107

Implications for Regulatory Structure 107

Structural Options Considered 108

Industry-Based Regulators 109

The Market Failure-based Model 109

The Super Regulator Model 110

The Committee Recommendations 111

The South African Case / Andre Bezuidenhout 115

South Africa's Financial Environment 116

The Process to Review the Regulatory Environment 117

A Mild Bank Liquidity Crisis 119

Country-Specific Features Informing the Structural Decision 120

Openness of the Economy and the Discretion of the Central Bank 120

Concentration in Banking 121

Settlement System and Time to React 122

The Financial Safety Net and Deposit Insurance 122

Lack of True Integration in Financial Groups 123

The Role of State-Owned and Foreign-Owned Banks 124

Rationale for an Objective-Based Approach 124

A Model for Good Times and Bad? 126

The New Structure of Financial Regulation in Ireland / Liam O'Reilly 129

International Trends and Issues in Financial Regulation 130

Rationale for Reviewing the Structure of Financial Regulation in Ireland 131

Process Involved in Implementing the Government Decision 132

Why This Model Is Suitable for Ireland 134

The New Structure in Operation 136

Financial Stability 138

Regulation of All Sectors 139

Strategic Plan, 2004-06 142

Central Bank and Financial Services Authority of Ireland Bill, 2003 143

Confidentiality Rules 144

Funding Arrangements 145

Chapter 4 The Speed of Change: Balancing the Risks 149

Issues in the Unification of Supervision: Lessons from the Swedish Experience / Stefan Ingves 149

Managerial Challenges 152

The Swedish Experience 153

The Integration of Financial Supervisory Bodies: The Korean Experience / Seok-Keun Lee 161

The Need for Change and the Decision to Integrate 162

The Process of Integration 164

The Planning Process 165

Organizational Structure of the Financial Supervisory Service 166

The Benefits and Challenges of Integration 167

Key Factors for Successful Integration 169

The Big Bang Approach in Korea and Elsewhere 169

Chapter 5 Transitional Issues in Emerging Markets 171

The Organizational Structure of Financial Supervision: The Salvadoran Case / Ana Margoth Arevalo 171

Time Frame and Rationale for Separation 172

From the Central Bank to an Independent Agency 173

Supervision of the Securities Market and Pension Funds 174

Assessment of the Process 175

The Agencies 176

Role of the Central Bank 179

Coordinating Mechanisms 179

The Changing Financial Sector Landscape: Implications for the Regulatory Structure 181

The Single Financial Supervisor: The Hungarian Case / Laszlo Balogh 187

Features of the Hungarian Financial Landscape 188

The Objectives of Integration 191

The Process of Integration 193

International Road Map for Further Development 196

Issues Considered in the Integration of Supervision 198

Supervisory Independence 199

Institutional Autonomy 200

Budgetary Autonomy 200

Administrative Autonomy 201

Regulatory Autonomy 201

Accountability and Transparency 202

Practical Challenges of Integration 203

Chapter 6 Making Regulatory Structures Effective 209

Establishing Legal Consistency for Integrated Regulation / Peter R. Kyle 209

Constitutional Limitations: Independence of the Central Bank and Role of the Judiciary 210

Legislative Environment 213

Specific Legal Issues 217

Creating an Effective Regulatory Culture in Estonia / Andres Trink 223

The Process of Integration 224

Preparation Phase: Selecting Staff and Preparing People 224

Formal Launch 225

Transition Phase 226

Challenges Encountered 228

Lack of Common Benchmarks of Performance 228

Differences in Compensation 228

Fear of New Leadership and Hierarchy 229

Differences in Supervisory Approach, Scope, and Methods 229

Inherent Conflicts in Regulatory Cultures 230

Enforcement Policy in a Transitional Supervisor 230

Practical Solutions Applied 231

Communicating with Stakeholders: Issues to Consider / Howard Davies 233

Who Are the Relevant Stakeholders? 233

How to Communicate? 234

What to Communicate? 235

How to Measure Success in Stakeholder Communications? 236

Chapter 7 Keynote Addresses from the Conference 237

Integrated Regulation in the United Kingdom and the Lessons for Others / Howard Davies 237

Creation of the Financial Services Authority 237

How Successful Has FSA Been? 239

The Case for Integrated Regulation 242

The Case Against Integration and Why It Is Wrong 244

Overly Bureaucratic? 245

Overly Powerful? 245

Loss of Specialist Expertise? 246

Conflict between Prudential and Conduct-of-Business Regulation? 247

The Central Bank Problem? 249

The Preconditions for Success 254

Implementing an Integrated Supervisor in Estonia: Lessons Learned / Andres Trink 257

Table 2.1 Regulatory Matrix 38

Table 2.2 Main Reasons for Adopting Integrated Supervision 47

Table 2.3 Problems in Establishing Integrated Supervisory Agencies 51

Table 2.4 Structure of Supervision in 77 Countries, 2002 72

Table 2.5 Bank Regulators in 69 Countries 73

Table 2.6 Supervision Authorities in 69 Countries, 2002 74

Table 2.7 Scope of Unified Supervisory Agencies 78

Table 2.8 Powers of the Integrated Supervisory Agencies over Banks 80

Figure 2.1 FAC Index and CBFA Index in 69 Countries, 2002 76

Figure 3.1 Board Membership 136

Figure 3.2 Relationship between Central Bank and Financial Services Regulator 137

Figure 3.3 Organizational Chart of the Irish Financial Services Regulatory Authority 141

Figure 5.1 Structure of Financial Supervision in El Salvador 177

Figure 5.2 Functional Setup of HFSA, 2003 195

Box 5.1 Timetable for Setting Up the Single Financial Supervisor in Hungary 193

Box 5.2 International Road Map of Assessments 197.

Notes:

Papers presented at a conference entitled Aligning financial supervisory structure with country needs on Dec. 4-5, 2003 at the World Bank Institute in Washington, D.C.

Includes bibliographical references (pages 89-92).

ISBN:

0821360027

OCLC:

56617188