Abstract

http://ssrn.com/abstract=1711230
 
 

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The Governance of Financial Supervisors: Improving Responsiveness to Market Developments


Luca Enriques


University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Gerard Hertig


ETH Zurich; European Corporate Governance Institute (ECGI)

November 1, 2010

Paolo Baffi Centre Research Paper No. 2010-82
ECGI - Law Working Paper No. 171/2010

Abstract:     
We offer a menu of mechanisms to improve the governance of ‘normal times’ financial supervisors (as opposed to resolution agencies and systemic risk boards). To enhance supervisory effectiveness, we propose to institutionalize strong CEOs, with boards or commissions being limited to basic policy decision‐making and to monitoring. Moreover, lower level staff would get increased line responsibilities. Market responsiveness, for its part, would be improved by subjecting supervisors to reinforced disclosure requirements. In addition, they would have to ‘act or explain’ when a financial intermediary’s RoE or CDS spreads rise above pre‐set thresholds. Finally, the market for supervisory control would be fostered by reinforcing the contingent powers of resolution agencies. This menu approach facilitates implementation and avoids ‘one size fits all’ effects.

Number of Pages in PDF File: 51

Keywords: Supervisory Agency Decision-Making, Financial Supervision, Governance, Supervisory Responsiveness, Transparency

JEL Classification: D23, D73, G28, H83, K22, L22

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Date posted: November 19, 2010 ; Last revised: February 4, 2011

Suggested Citation

Enriques, Luca and Hertig, Gerard, The Governance of Financial Supervisors: Improving Responsiveness to Market Developments (November 1, 2010). Paolo Baffi Centre Research Paper No. 2010-82; ECGI - Law Working Paper No. 171/2010. Available at SSRN: http://ssrn.com/abstract=1711230 or http://dx.doi.org/10.2139/ssrn.1711230

Contact Information

Luca Enriques (Contact Author)
University of Oxford - Faculty of Law ( email )
St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http:/www.ecgi.org
Gerard Hertig
ETH Zurich ( email )
IFW E 49
Haldeneggsteig 4
CH-8092 Zurich
Switzerland
+4144-632-4008 (Phone)
+4144-632-1097 (Fax)
HOME PAGE: http://www.hertig.ethz.ch
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
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