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Is One Watchdog Better Than Three? International Experience with Integrated Financial Sector Supervision

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  • Martin Cihak
  • Richard Podpiera

Abstract

Over the past two decades, there has been a clear trend toward integrating the regulation and supervision of banks, nonbank financial institutions, and securities markets. This paper reviews the international experience with integrated supervision. We survey the theoretical arguments for and against the integrated supervisory model, and use data on compliance with international standards to assess the validity of some of these arguments. We find that (i) full integration is associated with higher quality of supervision in insurance and securities and greater consistency of supervision across sectors, after controlling for the level of development; and (ii) fully integrated supervision is not associated with a significant reduction in supervisory staff.

Suggested Citation

  • Martin Cihak & Richard Podpiera, 2006. "Is One Watchdog Better Than Three? International Experience with Integrated Financial Sector Supervision," IMF Working Papers 06/57, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:06/57
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    References listed on IDEAS

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    1. Udaibir S Das & Marc G Quintyn, 2002. "Crisis Prevention and Crisis Management; The Role of Regulatory Governance," IMF Working Papers 02/163, International Monetary Fund.
    2. Udaibir S Das & Marc G Quintyn & Kina Chenard, 2004. "Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis," IMF Working Papers 04/89, International Monetary Fund.
    3. Gianni De Nicolo & Mary G Zephirin & Philip F. Bartholomew & Jahanara Zaman, 2003. "Bank Consolidation, Internationalization, and Conglomeration; Trends and Implications for Financial Risk," IMF Working Papers 03/158, International Monetary Fund.
    4. Richard K. Abrams & Michael W Taylor, 2000. "Issues in the Unification of Financial Sector Supervision," IMF Working Papers 00/213, International Monetary Fund.
    5. Richard Podpiera, 2004. "Does Compliance with Basel Core Principles Bring Any Measurable Benefits?," IMF Working Papers 04/204, International Monetary Fund.
    6. Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
    7. 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. Melanie S. Milo, 2007. "Integrated Financial Supervision : An Institutional Perspective for the Philippines," Finance Working Papers 22667, East Asian Bureau of Economic Research.
    2. Kenneth Sullivan, 2008. "Presentación proactiva del desempeño," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 130-135, Julio-sep.
    3. Kawai, Masahiro & Pomerleano, Michael, 2010. "Regulating Systemic Risk," ADBI Working Papers 189, Asian Development Bank Institute.
    4. Jeżowski Mirosław, 2015. "Design and Factors Affecting State Supervision of the Financial Market," Management and Business Administration. Central Europe, De Gruyter Open, vol. 23(1), pages 113-129, March.
    5. Jackson, Howell E. & Roe, Mark J., 2009. "Public and private enforcement of securities laws: Resource-based evidence," Journal of Financial Economics, Elsevier, vol. 93(2), pages 207-238, August.
    6. Bartosz Godziszewski & Michal Kruszka, 2013. "Stability of Banking System in Poland and Activity of the KNF - Polish Financial Supervision Authority," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(1), pages 29-34, May.
    7. Ovidiu Stoica & Delia-Elena Diaconasu, 2012. "Regional Economic Integration And National Financial Supervision. A Comparative Study," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(14), pages 1-23.
    8. Estrada, Dairo Ayiber & Gutiérrez R., Javier, 2009. "Supervisión y regulación del sistema financiero: modelos, implicaciones y alcances," PERFIL DE COYUNTURA ECONÓMICA, UNIVERSIDAD DE ANTIOQUIA - CIE, August.
    9. Martin Čihák & Alexander Tieman, 2011. "Quality of Financial Sector Regulation and Supervision Around the World," Chapters,in: Handbook of Central Banking, Financial Regulation and Supervision, chapter 15 Edward Elgar Publishing.
    10. Petr Musílek, 2006. "Comparison Models of the Financial Regulation and Supervision: Advantages and Disadvantages," Český finanční a účetní časopis, University of Economics, Prague, vol. 2006(4), pages 8-22.
    11. Buklemishev, O. & Danilov, Yu., 2013. "Effective Financial Regulation and Creation of the Mega-Regulator in Russia," Journal of the New Economic Association, New Economic Association, vol. 19(3), pages 82-98.
    12. Milo, Melanie S., 2007. "Integrated Financial Supervision: an Institutional Perspective for the Philippines," Discussion Papers DP 2007-17, Philippine Institute for Development Studies.
    13. Marc G Quintyn & Michael W Taylor, 2007. "Building Supervisory Structures in Sub-Saharan Africa; An Analytical Framework," IMF Working Papers 07/18, International Monetary Fund.
    14. Petr Musílek, 2008. "Institutional Arrangement of Financial Markets Supervision: The Case of the Czech Republic," European Financial and Accounting Journal, University of Economics, Prague, vol. 2008(4), pages 6-21.
    15. Francesc Trillas Jané, 2016. "Behavioral Regulatory Agencies," Working Papers wpdea1606, Department of Applied Economics at Universitat Autonoma of Barcelona.
    16. Folarin Akinbami & Franklin N Ngwu, 2016. "Overhauling the institutional structure of financial regulation in Nigeria: The unfinished reform," Journal of Banking Regulation, Palgrave Macmillan, vol. 17(4), pages 311-331, November.
    17. Jenny Corbett, 2007. "Financial Institutions and Structures for Growth in East Asia," EABER Working Papers 21858, East Asian Bureau of Economic Research.
    18. Monkiewicz Jan, 2009. "Enterprise Management and Regulation of Economic Activity: The Case of Insurance," Foundations of Management, De Gruyter Open, vol. 1(2), pages 129-142, January.
    19. Pasali, Selahattin Selsah, 2013. "Where is the cheese ? synthesizing a giant literature on causes and consequences of financial sector development," Policy Research Working Paper Series 6655, The World Bank.
    20. Banco Central Europeo, 2008. "La titulización en la zona del euro," Boletín, Centro de Estudios Monetarios Latinoamericanos, vol. 0(3), pages 136-149, Julio-sep.

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