Integrated Financial Supervision: Lessons from Northern European Experience

Abstract

Drawing on Northern European experiencewhere quickly, but tends to preserve the cultures and identities three Scandinavian countries Iaave practiced integrated of the predecessor agencies more than is oytimal. supervision for the past 10 years -Taylor and Fleming Whatever the structure, integrated supervisioon requires address three policy-related issues associated with the active management to secure the potential benefits that integrated model: the approach offers. * Under what conditions should (or should not) a * How should the integration process be country consider moving toward an integrated model of implemented? financial supervision?While the decision to move to an integratecd agency Clearly, for a small transition or developing econormy, must be carefully thought through in the context of the or an economy with a small financial sector, the country concerned, the more difficult part is economies of scale from establishing an integrated implementation, which must be sensitively anonaged. agency outweigh the costs of mnoving to such a model. AOnce the decision has been made, implementation strong case can also be made for an integrated approach should take place as quickly as possible. A vwell-conceived in a financial sector dominated by banks, with little role "change management" process should aim t-overcome for capital markets or a highly integrated financial sector.the cultural barriers associated with the previous * How shoulcl an integrated agency be structured, fragmented structure. organized, and managed?Taylor and Fleming's review of Northern European There is no single obviously correct organizational experience with integration of financial supervision raises structure, and existing agencies are experimenting with a a range of questions relevant to developing and variety of forms. An institutionally based structure has transition economies, which they discuss. the virtue of simplicity and can be implemented fairly This papera product of the IPrivate and Financial Sectors Development Unit, Europe and Central Asia Rejionis pa:t of a larger effort in the region to assist transition economies in strengthening the legal and regulatory frame';

Integrated Financial Supervision: Experiences in Selected Countries

“…The fact that most of the agencies are funded by the regulated industries is important because it makes it possible for them to be independent of the nation's finance or economic ministry, to which (in most cases) they report, either directly or indirectly (see Taylor and Fleming, 1999). All agencies state that they receive sufficient financial resources.…”