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Integrated financial supervision : lessons of Northern European experience

Author

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  • Taylor, Michael
  • Fleming, Alex

Abstract

Drawing on Northern European experience - where three Scandinavian countries have practiced integrated supervision for the past 10 years - the authors address three policy-related issues associated with the integrated model: a) Under what conditions should (or should not) a country consider moving toward an integrated model of financial supervision? Clearly, for a small transition or developing economy, or an economy with a small financial sector, the economies of scale from establishing an integrated agency outweigh the costs of moving to such a model. A strong case can also be made for an integrated approach in a financial sector dominated by banks, with little role for capital markets or a highly integrated financial sector. b) How should an integrated agency be structured, organized, and managed? There is no single obviously correct organizational structure, and existing agencies are experimenting with a variety of forms. An institutionally based structure has the virtue of simplicity and can be implemented fairly quickly, but tends to preserve the cultures and identities of the predecessor agencies more than is optimal. Whatever the structure, integrated supervision requires active management to secure the potential benefits that the approach offers. C) How should the integration process be implemented? While the decision to move to an integrated agency must be carefully thought through in the context of the country concerned, the more difficult part is implementation, which must be sensitively managed. Once the decision has been made, implementation should take place as quickly as possible. A well-conceived"change management"process should aim to overcome the cultural barriers associated with the previous fragmented structure. The authors'review of Northern European experience with integration of financial supervision raises a range of questions relevant to developing and transition economies, which they discuss.

Suggested Citation

  • Taylor, Michael & Fleming, Alex, 1999. "Integrated financial supervision : lessons of Northern European experience," Policy Research Working Paper Series 2223, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2223
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    References listed on IDEAS

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    1. Burkhard Drees & Ceyla Pazarbasioglu, 1998. "The Nordic Banking Crisis; Pitfalls in Financial Liberalization: Pitfalls in Financial Liberalization," IMF Occasional Papers 161, International Monetary Fund.
    2. Claudio E. V. Borio & Renato Filosa, 1994. "The changing borders of banking: trends and implications," BIS Working Papers 23, Bank for International Settlements.
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    Cited by:

    1. Sabrina Pellerin & John R. Walter & Patricia E. Wescott, 2009. "The consolidation of financial market regulation : pros, cons, and implications for the United States," Working Paper 09-08, Federal Reserve Bank of Richmond.
    2. Melanie S. Milo, 2007. "Integrated Financial Supervision : An Institutional Perspective for the Philippines," Finance Working Papers 22667, East Asian Bureau of Economic Research.
    3. Schüler, Martin, 2004. "Integrated Financial Supervision in Germany," ZEW Discussion Papers 04-35, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. 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.
    5. Edward Palmer, 2006. "El Nuevo Sistema de Pensiones Sueco de Cuentas Individuales Capitalizadas," Working Papers 15, Superintendencia de Pensiones, revised Oct 2006.
    6. de Luna Martinez, Jose & Rose, Thomas A., 2003. "International survey of integrated financial sector supervision," Policy Research Working Paper Series 3096, The World Bank.
    7. Marc Quintyn & Michael W. Taylor, 2003. "Regulatory and Supervisory Independence and Financial Stability," CESifo Economic Studies, CESifo, vol. 49(2), pages 259-294.
    8. Kenneth Kaoma Mwenda, 2006. "Legal Aspects of Financial Services Regulation and the Concept of a Unified Regulator," World Bank Publications, The World Bank, number 6952.
    9. Al-Jarhi, Mabid Ali, 2005. "The Case For Universal Banking As A Component Of Islamic Banking," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 13, pages 2-65.
    10. Masciandaro, Donato & Quintyn, Marc, 2008. "Helping hand or grabbing hand?: Politicians, supervision regime, financial structure and market view," The North American Journal of Economics and Finance, Elsevier, vol. 19(2), pages 153-173, August.
    11. Giorgio Di Giorgio & Carmine Di Noia & Laura Piatti, 2000. "Financial Market Regulation: The Case of Italy and a Proposal for the Euro Area," Center for Financial Institutions Working Papers 00-24, Wharton School Center for Financial Institutions, University of Pennsylvania.
    12. Giorgio Di Giorgio & Carmine Di Noia, 2001. "Financial Regulation and Supervision in the Euro Area: A Four-Peak Proposal," Center for Financial Institutions Working Papers 01-02, Wharton School Center for Financial Institutions, University of Pennsylvania.
    13. Greg Brunner & Pablo Gottret & Birgit Hansl & Vijayasekar Kalavakonda & Somil Nagpal & Nicole Tapay, 2012. "Private Voluntary Health Insurance : Consumer Protection and Prudential Regulation," World Bank Publications, The World Bank, number 13093.
    14. Donato Masciandaro, 2006. "E Pluribus Unum? Authorities' Design in Financial Supervision: Trends and Determinants," Open Economies Review, Springer, vol. 17(1), pages 73-102, January.
    15. Jeffrey Carmichael & Michael Pomerleano, 2002. "The Development and Regulation of Non-Bank Financial Institutions," World Bank Publications, The World Bank, number 15236.
    16. Richard S. Grossman, 2006. "The Emergence of Central Banks and Banking Regulation in Comparative Perspective," Wesleyan Economics Working Papers 2006-021, Wesleyan University, Department of Economics.
    17. Milo, Melanie S., 2007. "Integrated Financial Supervision: an Institutional Perspective for the Philippines," Discussion Papers DP 2007-17, Philippine Institute for Development Studies.
    18. Sayuri Shirai, 2001. "Searching for New Regulatory Frameworks for the Intermediate Financial Structure in Post-Crisis Asia," Center for Financial Institutions Working Papers 01-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
    19. Dayoub, Mariam & Lasagabaster, Esperanza, 2008. "General trends in competition policy and investment regulation in mandatory defined contribution markets in Latin America," Policy Research Working Paper Series 4720, The World Bank.
    20. Donato Masciandaro & Marc Quintyn, 2010. "Institutions Matter: Financial Supervision Architecture, Central Bank and Path-Dependence. General Trends and the South Eastern European Countries," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 8(1), pages 7-53.
    21. Claessens, Stijn & Klingebiel, Daniela, 1999. "Alternative frameworks for providing financial services," Policy Research Working Paper Series 2189, The World Bank.

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    Keywords

    Financial Intermediation; Banks&Banking Reform; Insurance&Risk Mitigation; Environmental Economics&Policies; National Governance;

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