The Fear of Freedom: Politicians and the Independence and Accountability of Financial Sector Supervisors

By Michael W Taylor, Marc G Quintyn, Silvia Ramirez

February 1, 2007

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Michael W Taylor, Marc G Quintyn, and Silvia Ramirez. The Fear of Freedom: Politicians and the Independence and Accountability of Financial Sector Supervisors, (USA: International Monetary Fund, 2007) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Compared with the case of central bank independence, independence for financial sector supervisors remains more controversial. This paper analyzes changes in independence and accountability arrangements in a set of 32 countries that overhauled their legal and/or institutional frameworks for supervision in recent years. Despite improvements, there is strong evidence that the endorsement of independence remains half-hearted, which shows itself through either overcompensation on the accountability side, or resort to political control mechanisms. The latter could potentially undermine the agency's credibility. The results indicate that policymakers still need to be persuaded of the long-term benefits of independence for financial sector soundness, and of the potential for a virtuous interaction between independence and accountability, if the arrangements are well-designed.

Subject: Bank supervision, Banking, Central bank autonomy, Central banks, Economic sectors, Financial regulation and supervision, Financial sector, Legal support in revenue administration, Revenue administration

Keywords: Accountability arrangement, Africa, Agency independence, Bank supervision, Central bank autonomy, Executive branch, Financial regulation, Financial sector, Independence rating, Legal support in revenue administration, Minister of finance, Monetary policy, Public administration accountability, RSA independence, WP

Publication Details

Pages:

50
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/025
Stock No:

WPIEA2007025
ISBN:

9781451865899
ISSN:

1018-5941

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