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Ms. Jennifer A. Elliott, Mr. Aditya Narain, Ian Tower, José Vinãls, Pierluigi Bologna, Michael Hsu, and Jonathan Fiechter
The quality of financial sector supervision has emerged as a key issue from the financial crisis. While most countries operated broadly under the same regulatory standards, differences emerged in supervisory approaches. The international response to this crisis has focused on the need for more and better regulations (e.g., in areas such as bank capital, liquidity and provisioning) and on developing a framework to address systemic risks, but there has been less discussion of how supervision itself could be strengthened. The IMF’s work in assessing compliance with financial sector standards over the past decade in member countries suggests that while progress is being made in putting regulation in place, work remains to be done in many countries to strengthen supervision. How can this enhanced supervision be achieved? Based on an examination of lessons from the crisis and the findings of these assessments of countries’ compliance with financial standards, the paper identifies the following key elements of good supervision—that it is intrusive, skeptical, proactive, comprehensive, adaptive, and conclusive. To achieve these elements, the “ability” to supervise, which requires appropriate resources, authority, organization and constructive working relationships with other agencies must be complemented by the “will” to act. Supervisors must be willing and empowered to take timely and effective action, to intrude on decision-making, to question common wisdom, and to take unpopular decisions. Developing this “will to act” is a more difficult task and requires that supervisors have a clear and unambiguous mandate, operational independence coupled with accountability, skilled staff, and a relationship with industry that avoids “regulatory capture.” These essential elements of good supervision need to be given as much attention as the regulatory reforms that are being contemplated at both national and international levels. Indeed, only if supervision is strengthened can we hope to effectively deliver on the challenging—but crucial—regulatory reform agenda. For this to happen, society must stand with supervisors as they play their role as naysayers in times of exuberance.
Mr. Robert Rennhack
The Latin America and Caribbean (LAC) region has weathered the global financial crisis reasonably well so far, although tighter global financial conditions began to take their toll on trade, capital flows and economic growth in late 2008. This resilience reflects the reforms put in place by many countries over the past decade to strengthen financial supervision and adopt sound macroeconomic policies. Building on this progress, the region’s financial sector reform agenda now aims at further improvements, including steps aiming to improve compliance with the Basel Core Principles of Banking Supervision and to broaden and deepen domestic financial markets.
Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Policymakers are often reluctant to grant independence to the agencies that regulate and supervise the financial sector because of the fear that these agencies, with their wide-ranging responsibilities and powers, could become a law unto themselves. This pamphlet describes mechanisms for making regulatory agencies accountable not only to the government but also to the industry they supervise and the public at large, with examples from a range of countries.

International Monetary Fund

Abstract

Globalization requires enhanced information flows among financial regulators. Standard-setting bodies for financial sector regulation provide extensive guidance, but financial sector assessments have often found that problems in cooperation and information exchange continue to constrain cross-border supervision and financial integrity oversight. In July 2004, the IMF organized a conference on cross-border cooperation for standard setters, financial intelligence units (FIUs), and financial regulatory agencies. This book brings together conference papers in which participants discuss: information exchange for an effective anti–money laundering/combating the financing of terrorism (AML/CFT) regime, in terms of both standards and practices; the standards for cooperation in the insurance sector; and the experiences of regulators from banking, securities, and unified regulatory agencies with international cooperation. The book also includes papers providing a general overview of international standards and their implementation and, on the basis of survey results, of practices among financial sector regulators and FIUs.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Les décideurs rechignent souvent à accorder l’indépendance aux agences qui réglementent et supervisent le secteur financier, car ils craignent que ces agences, avec leurs responsabilités et leurs pouvoirs étendus, puissent imposer leur loi. Cette brochure décrit les mécanismes permettant de garantir que ces agences soient redevables non seulement envers l'État, mais également envers le secteur qu'elles supervisent et envers le grand public, et propose des exemples de divers pays.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Policymakers are often reluctant to grant independence to the agencies that regulate and supervise the financial sector because of the fear that these agencies, with their wide-ranging responsibilities and powers, could become a law unto themselves. This pamphlet describes mechanisms for making regulatory agencies accountable not only to the government but also to the industry they supervise and the public at large, with examples from a range of countries.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Las autoridades de política económica suelen ser renuentes a otorgar independencia a los organismos que regulan y supervisan el sector financiero debido al temor de que estos organismos, con responsabilidades y poderes de amplio alcance, puedan convertirse en una fuente normativa por sí mismos. Este folleto describe los mecanismos para que los organismos reguladores rindan cuentas no solo ante el gobierno sino también ante la industria que supervisan y el público en general, con ejemplos sobre una amplia gama de países.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Policymakers are often reluctant to grant independence to the agencies that regulate and supervise the financial sector because of the fear that these agencies, with their wide-ranging responsibilities and powers, could become a law unto themselves. This pamphlet describes mechanisms for making regulatory agencies accountable not only to the government but also to the industry they supervise and the public at large, with examples from a range of countries.

Ms. Eva H. G. Hüpkes, Mr. Michael W Taylor, and Mr. Marc G Quintyn

Abstract

Policymakers are often reluctant to grant independence to the agencies that regulate and supervise the financial sector because of the fear that these agencies, with their wide-ranging responsibilities and powers, could become a law unto themselves. This pamphlet describes mechanisms for making regulatory agencies accountable not only to the government but also to the industry they supervise and the public at large, with examples from a range of countries.

Mr. Marc G Quintyn and Mr. Michael W Taylor

Abstract

In nearly every major financial crisis of the past decade-from East Asia to Russia, Turkey, and Latin America-political interference in financial sector regulation helped make a bad situation worse. Political pressures not only weakened financial regulation, but also hindered regulators and supervisors from taking action against troubled banks. This paper investigates why, to fulfill their mandate to preserve financial sector stability, financial sector regulators and supervisors need to be independent-from the financial services industry as well as from the government-as well as accountable.