Regulatory and Supervisory Independence and Financial Stability

Author/Editor:

Michael W Taylor ; Marc G Quintyn

Publication Date:

March 1, 2002

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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:

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.

Series:

Working Paper No. 02/46

Subject:

English

Publication Date:

March 1, 2002

ISBN/ISSN:

9781451846560/1018-5941

Stock No:

WPIEA0462002

Format:

Paper

Pages:

54

Please address any questions about this title to publications@imf.org