IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Efficiency in Finacial Regulation and Reform of Supervisory

Listed author(s):
  • Ramiro Tovar-Landa

    (Instituto Tecnologico Autonomo de Mexico)

Traditionally, the financial regulation it used to structure itself on the basis of specialized organizations, each one responsible to supervise the intermediaries by the type of activity that was carried out. The current trend is toward an integrated model that reunite in one or two organizations the different functions that previously were responsibility of diverse specialized authorities. From the modern theory of economic regulations it is possible to assess a regulatory regimen by how close is to address the market failures on the market supposed to regulated and how minimal is the social cost it imposed over its regulated entities and the market as a whole. A regulatory regime of fragmented supervisory authorities increases the risk of regulatory failures therefore not always capable to exploit the economies of scale and scope in a regulatory task intensive in opportune information gathering and processing, also exposed to regulatory forbearance and becoming interest groups by themselves. In fact, becoming each regulator a monopoly over its regulated entities, creating rents by protecting a turf of captive supervisory powers incompatible and unsynchronized with each other. Therefore, incrementing the cost of regulation. Considering the cost of regulation as a fixed cost on each domestic financial market. An efficient setting would be a low fixed cost relative to a high sized financial market. The relative performance efficiency between the multiple regulatory agencies model and the single regulator model is empirically an open question, despite of the international spread of the single model in the last decade in more than ten countries. Low income countries with severe underdeveloped financial markets and costly multiple authorities scheme calls for a prime candidates to reform its financial regulatory. Using indicators from supervisory cost and financial activity size, Mexico appears to be the economy with the highest fixed cost in an underdeveloped or small size financial activity relative to the GDP therefore, it means a highly inefficient regulatory organization. Urgent supervisory institutional scheme reform is required according with international benchmarks.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by EconWPA in its series Law and Economics with number 0209002.

in new window

Length: 22 pages
Date of creation: 16 Sep 2002
Handle: RePEc:wpa:wuwple:0209002
Note: Type of Document - Acrobat; prepared on iMac; pages: 22; figures: 2 included. Prepared for the 8th APEC FINANCIERS┬┤GROUP MEETING in behalf of the Asociacion de Banqueros de Mexico.
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwple:0209002. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.