Financial Supervision: Which Model for Europe?
Increasing integration within the European Union (EU) gives rise to cross-border spill-over effects or externalities. The present national based system of financial supervision does not incorporate theseexternalities. Assessing the degree of integration, we find that the EU has not yet a fully integrated financial market. But if and when the process of integration is nearing completion, policy-makers willneed to consider moving to European solutions.How to choose an appropriate supervisory model for Europe? Responding to the trend of cross-sector integration, two main models have emerged: a functional model (separate supervisors for prudentialsupervision and conduct of business) and an integrated model (a single supervisor). The jury is still out on which model performs better (e.g. in weathering a financial crisis). We propose to apply some degree of model competition to facilitate the discovery of the best model.Finally, we explore the question of the appropriate policy stance for financial supervision in Europe. Key elements of such a policy stance are supervisory skills, market discipline and private-sector control. Policy standards could be further developed via benchmarking of best practices within the new Lamfalussy framework.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-560, October.
- Jürgen Von Hagen & Ingo Fender, 1998.
"Central Bank Policy in a More Perfect Financial System,"
Open Economies Review,
Springer, vol. 9(1), pages 493-532, January.
- von Hagen, Jürgen & Fender, Ingo, 1998. "Central bank policy in a more perfect financial system," ZEI Working Papers B 03-1998, University of Bonn, ZEI - Center for European Integration Studies.
- Xavier Vives, 2001. "Restructuring Financial Regulation in the European Monetary Union," Journal of Financial Services Research, Springer;Western Finance Association, vol. 19(1), pages 57-82, February.
- Heinemann, Friedrich & Jopp, Mathias, 2002. "The benefits of a working European Retail Market for financial services: Report to European Financial Services Round Table," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110486.
- Calomiris, Charles W., 1999. "Building an incentive-compatible safety net," Journal of Banking & Finance, Elsevier, vol. 23(10), pages 1499-1519, October. Full references (including those not matched with items on IDEAS)