Regulatory and Supervisory Independence and Financial Stability

54 Pages Posted: 29 Jan 2006

See all articles by Marc Quintyn

Marc Quintyn

International Monetary Fund (IMF)

Michael Taylor

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department

Date Written: March 2002

Abstract

Despite its importance, the issue of financial sector regulatory and supervisory independence (RSI) has received only marginal attention in literature and practice. However, experience has demonstrated that improper supervisory arrangements have contributed significantly to the deepening of several recent systemic banking crises. In this paper we argue that RSI is important for financial stability for the same reasons that central bank independence is important for monetary stability. The paper lays out four key dimensions of RSI - regulatory, supervisory, institutional and budgetary - and discusses ways to achieve them. We also discuss institutional arrangements needed to make independence work in practice. The key issue in this respect is that agency independence and accountability need to go hand in hand. The paper discusses a number of accountability arrangements.

Keywords: Financial Regulation, Banking Supervision, Regulatory Agencies, Agency Independence, Central Bank Independence

JEL Classification: G18, G28, K23, L50

Suggested Citation

Quintyn, Marc and Taylor, Michael William, Regulatory and Supervisory Independence and Financial Stability (March 2002). IMF Working Paper No. 02/46, Available at SSRN: https://ssrn.com/abstract=879439

Marc Quintyn (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Michael William Taylor

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6388 (Phone)

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