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

Author/Editor:

Michael W Taylor ; Marc G Quintyn ; Silvia Ramirez

Publication Date:

February 1, 2007

Electronic Access:

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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.

Series:

Working Paper No. 07/25

Subject:

English

Publication Date:

February 1, 2007

ISBN/ISSN:

9781451865899/1018-5941

Stock No:

WPIEA2007025

Format:

Paper

Pages:

50

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