## The Making of Good Supervision: Learning to Say "No"

_IMF Staff Position Notes, May 18, 2010_

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**Canonical URL:** [The Making of Good Supervision: Learning to Say "No"](https://www.imf.org/en/publications/imf-staff-position-notes/issues/2016/12/31/the-making-of-good-supervision-learning-to-say-no-23799)

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## Bibliographic details
- Authors: Jennifer A. Elliott, Aditya Narain, Ian Tower, José Vinãls, Pierluigi Bologna, Michael Hsu, Jonathan Fiechter
- Published: May 18, 2010
- Series: IMF Staff Position Notes
- DOI: https://doi.org/10.5089/9781462310180.004

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### Central problem and context
- The quality of financial sector supervision emerged as a key issue from the financial crisis.
- Most countries operated broadly under the same regulatory standards, but differences emerged in supervisory approaches.
- International response emphasized more and better regulations (for example, in areas such as bank capital, liquidity and provisioning) and a framework to address systemic risks, with less discussion of how supervision itself could be strengthened.
- IMF assessments over the past decade indicate progress in putting regulation in place, but significant work remains to strengthen supervision in many countries.

### Key elements of good supervision (findings)
- Good supervision is:
  - intrusive
  - skeptical
  - proactive
  - comprehensive
  - adaptive
  - conclusive
- Achieving these elements requires both:
  - the “ability” to supervise (appropriate resources, authority, organization, constructive working relationships with other agencies)
  - the “will” to act (willingness and empowerment to take timely and effective action, to intrude on decision-making, to question common wisdom, and to take unpopular decisions)

### Barriers and institutional requirements
- Developing the “will to act” is particularly difficult and requires:
  - a clear and unambiguous mandate for supervisors
  - operational independence coupled with accountability
  - skilled staff
  - a relationship with industry that avoids “regulatory capture”
- Supervisory capacity is not only technical: it depends on legal and institutional arrangements that give supervisors authority and protect them from undue industry influence.

### Policy recommendations and implications
- Give essential elements of good supervision as much attention as regulatory reforms being contemplated at national and international levels.
- Strengthen both the ability and the will to supervise to deliver on the regulatory reform agenda effectively.
- Society must support supervisors as they act as naysayers in times of exuberance, enabling them to take necessary but potentially unpopular actions.

*Source: The Making of Good Supervision: Learning to Say "No", IMF Staff Position Note (May 18, 2010).*

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_Source: https://www.imf.org/en/publications/imf-staff-position-notes/issues/2016/12/31/the-making-of-good-supervision-learning-to-say-no-23799_