Banking supervision in a smaller financial centre – problems and recipes for success

Purpose - To contrast the challenges for bank regulators in a physically small centre such as the Bahamas with those for regulators in New York or London. To identify how the small centres can best meet their challenges, noting especially that Basel II is going to make even more important the smooth working of home and host country regulatory co‐operation. Design/methodology/approach - Contrasts are drawn from the author's personal experiences as a banking regulator in large and small centres and illustrated by examples from some of the latter. Likely reasons for regulatory “success or failure” in the smaller centres are then deduced and discussed. Findings - Smaller host country regulators have limited resources but can leverage these in a number of ways. They are also already heavily dependent on the competence of the home regulators and their willingness to share information. Co‐operation is going to become more important with the adoption of Basel II. The success of what emerges will help determine the cost and effectiveness of large banks' overseas operations. Practical implications - Home and host regulators need to make renewed efforts to co‐operate. One new initiative in the Bahamas is described to illustrate what might help. Originality/value - The author is one of relatively few banking regulators who have worked at senior level in a large home country, is a small host country regulator and one who can therefore assess the issue from both sides of the fence.