Are More Integrated Prudential Supervision Agencies Characterized By Better Regulation and Supervision?
29 Pages Posted: 7 Jul 2007
Date Written: July 5, 2007
Over the past two decades, there has been a clear trend in many countries toward integrating the prudential regulation and supervision of banks, nonbank financial institutions, and securities markets in a single national agency. This paper reviews the international experience with integrated supervisory agencies, using data on compliance with international standards to approximate quality of regulation and supervision. We find that 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. Also, we find that whether supervision is located inside our outside the central bank does not have a significant relationship to the quality of supervision, other things being equal. Our results are robust with respect to different definitions of integration. In particular, they do not change qualitatively whether we compare fully integrated supervisory agencies with other supervisory frameworks, or whether we use an index distinguishing different degrees of supervisory integration.
Keywords: financial services regulation, prudential supervision, supervisory agencies, integrated supervision
JEL Classification: G18, G28, K20, L50
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