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Financial Market Regulation: The Case of Italy and a Proposal for the Euro Area

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  • Giorgio Di Giorgio
  • Carmine Di Noia
  • Laura Piatti

Abstract

The objective of the present work is to sketch a proposal for the re-organisation of regulatory arrangements and supervisory agencies in the European financial markets. This proposal is formulated in light of the evolution of the role of intermediaries and aims at speeding the ongoing process of integration of financial markets in the Euro area. It is based on previous experiences in the matter of financial regulation at both national and international level. We start by reviewing objectives and theoretical models for the regulation of financial systems. We then move to highlight some features of financial market regulation in Italy that we consider somehow problematic as a consequence of the recent evolution in the financial intermediaries, instruments and markets. A proposal is then formulated for a new configuration for supervising the domestic financial market through the assignment of different objectives or "finalities" to different authorities. This perspective would thus entrust the three objectives of supervision -- stability, transparency and proper behaviour, competition -- to three distinct authorities designed to oversee the entire financial market regardless of the subjective nature of the intermediaries. We think that our proposal could be transferred (with some benefit) to the Euro area. This requires to explicitly address what is probably the weakest point and the more evident problem of the European Union construction, that of who takes care of financial stability. In particular, one has to re-examine the issue of the need for a lender of last resort and of the proper relationship of the European Central Bank with other financial market regulators. We propose to establish a European System of Financial Supervisors, with three distinct independent authorities (plus the ECB) at the European level. They will provide incentives for and co-ordinate the work of the three corresponding national authorities in each member country.

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Bibliographic Info

Paper provided by Wharton School Center for Financial Institutions, University of Pennsylvania in its series Center for Financial Institutions Working Papers with number 00-24.

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Date of creation: Jun 2000
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Handle: RePEc:wop:pennin:00-24

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References

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  1. Carmine Di Noia & Giorgio Di Giorgio, 1999. "Should banking supervision and monetary policy tasks be given to different agencies?," Economics Working Papers 411, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Lawrence J. White, 1996. "International Regulation of Securities Markets: Competition or Harmonization?," NBER Chapters, in: The Industrial Organization and Regulation of the Securities Industry, pages 207-242 National Bureau of Economic Research, Inc.
  3. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, December.
  4. Allen, Franklin & Santomero, Anthony M., 1997. "The theory of financial intermediation," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1461-1485, December.
  5. Padoa-Schioppa, Tommaso, 1999. "EMU and Banking Supervision," International Finance, Wiley Blackwell, vol. 2(2), pages 295-308, July.
  6. Robert Litan & William Isaac & William Taylor, 1994. "Financial Regulation," NBER Chapters, in: American Economic Policy in the 1980s, pages 519-572 National Bureau of Economic Research, Inc.
  7. Franks, Julian R. & Schaefer, Stephen M. & Staunton, Michael D., 1997. "The direct and compliance costs of financial regulation," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1547-1572, December.
  8. Charles Goodhart, 1999. "Myths About the Lender of Last Resort," FMG Special Papers sp120, Financial Markets Group.
  9. Lawrence J. White, . "Technological Change, Financial Innovation, and Financial Regulation: The Challenges for Public Policy," Center for Financial Institutions Working Papers 97-33, Wharton School Center for Financial Institutions, University of Pennsylvania.
  10. Taylor, Michael & Fleming, Alex, 1999. "Integrated financial supervision : lessons of Northern European experience," Policy Research Working Paper Series 2223, The World Bank.
  11. Giannini, C., 1998. ""Enemy of None but a Common Friend of All"? An International Perspective on the Lender-of-Last-Resort Function," Papers 341, Banca Italia - Servizio di Studi.
  12. Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group.
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Citations

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Cited by:
  1. Donato Masciandaro & María J. Nieto & Henriëtte Prast, 2007. "Financial governance of banking supervision," Banco de Espa�a Working Papers 0725, Banco de Espa�a.
  2. Jagoda Anna Kaszowska & Tomás Mancha Navarro & Juan Luis Santos, 2014. "Institutional and regulatory changes in the financial markets after the crisis emergence (2007-09)," Working Papers 02/14, Instituto Universitario de Análisis Económico y Social.
  3. Vashishtha, Ashutosh & Sharma, Anil K., 2012. "Indian financial market regulation: A dialectic model," Journal of Economics and Business, Elsevier, vol. 64(1), pages 77-89.

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