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The Fear of Freedom

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Author Info

  • Michael Taylor
  • Marc Quintyn
  • Silvia Ramirez

Abstract

Compared with the case of central bank independence, independence for financial sector supervisors remains more controversial. This paper analyzes changes in independence and accountability arrangements in a set of 32 countries that overhauled their legal and/or institutional frameworks for supervision in recent years. Despite improvements, there is strong evidence that the endorsement of independence remains half-hearted, which shows itself through either overcompensation on the accountability side, or resort to political control mechanisms. The latter could potentially undermine the agency''s credibility. The results indicate that policymakers still need to be persuaded of the long-term benefits of independence for financial sector soundness, and of the potential for a virtuous interaction between independence and accountability, if the arrangements are well-designed.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/25.

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Length: 50
Date of creation: 01 Feb 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/25

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Related research

Keywords: Bank supervision; Financial sector; banking; banking supervision; supervisory agency; central banking; bank independence; financial sector supervisors; financial regulation; supervisory agencies; bank of england; bank indonesia; banking crisis; financial sector supervision; supervisory process; financial supervision; banking system; good faith; financial accountability; bankers; internal audit; bank supervisors; supervisory authority; prudential regulation; banking crises; international standards; supervisory frameworks; banking publications; banking regulation; bank of canada; bank transparency; institutional underpinnings; integrated supervision; supervisory framework; monetary authority; bank laws; bank supervisor; bank insolvency; bank data; deposit insurance; prudential bank supervision; securities regulators; regulatory authority; banking law; recapitalization; market infrastructure; securities markets; bank for international settlements; bank failures; supervisory arrangements; connected lending; integrated regulation; banking industry; banking policy; judicial authority; insurance supervisors;

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Citations

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Cited by:
  1. Marc Quintyn, 2007. "Governance of Financial Supervisors and its Effects - A Stocktaking Exercise," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  2. Masciandaro, Donato & Nieto, Maria J. & Quintyn, Marc, 2011. "Exploring governance of the new European Banking Authority—A case for harmonization?," Journal of Financial Stability, Elsevier, Elsevier, vol. 7(4), pages 204-214, December.
  3. Demirgüç-Kunt, A. & Beck, T.H.L. & Honohan, P., 2008. "Finance for all?: Policies and pitfalls in expanding access," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3508393, Tilburg University.
  4. Masciandaro, Donato & Quintyn, Marc & Taylor, Michael W., 2008. "Inside and outside the central bank: Independence and accountability in financial supervision: Trends and determinants," European Journal of Political Economy, Elsevier, Elsevier, vol. 24(4), pages 833-848, December.
  5. Melanie S. Milo, 2007. "Integrated Financial Supervision : An Institutional Perspective for the Philippines," Finance Working Papers 22667, East Asian Bureau of Economic Research.
  6. Sofia Bauducco & Ales Bulir & Martin Cihak, 2008. "Monetary Policy Rules with Financial Instability," Working Papers, Czech National Bank, Research Department 2008/8, Czech National Bank, Research Department.
  7. Marc Quintyn, 2009. "Independent agencies: more than a cheap copy of independent central banks?," Constitutional Political Economy, Springer, Springer, vol. 20(3), pages 267-295, September.
  8. Milo, Melanie S., 2007. "Integrated Financial Supervision: an Institutional Perspective for the Philippines," Discussion Papers, Philippine Institute for Development Studies DP 2007-17, Philippine Institute for Development Studies.
  9. Marc Quintyn & Donato Masciandaro & María Nieto, 2009. "Will they Sing the Same Tune? Measuring Convergence in the New European System of Financial Supervisors," IMF Working Papers 09/142, International Monetary Fund.
  10. Boyer, Pierre C. & Ponce, Jorge, 2012. "Regulatory capture and banking supervision reform," Journal of Financial Stability, Elsevier, Elsevier, vol. 8(3), pages 206-217.

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