Private Enterprise and Financial Markets > Infrastructure and Financial Markets > Financial Markets
The Rationale for Integrating Financial Supervision in Latin America and the Caribbean
By Edgardo Demaestri, Federico Guerrero (07/03, IFM-135, En, Es)
There is strong interest around the world in the institutional aspects of financial regulation and supervision. This interest increased as several developed and developing countries started to integrate their specialized supervisory institutions into a single entity during the past few years. Of particular relevance is the relatively recent experience in the United Kingdom, where several specialized supervisory agencies were integrated into the Financial Services Authority (FSA).
Although some countries began adopting integrated supervision as early as the 1980s, a debate on the pros and cons of integrated supervision models emerged only recently. Issues in favor and against integration have been identified, but they have not yet been discussed in the context of a formal analytical framework or with a regional perspective.
The present study fills both gaps. It examines the rationale for the adoption of an integrated approach utilizing a methodology to analyze the efficacy and the efficiency of the specialized and integrated approaches in meeting the main objectives of financial regulation in the context of Latin America and the Caribbean countries. The paper considers the main arguments against and in favor of integration that are known to affect both approaches in practice and that have been discussed in the existing literature.
Consumer protection, systemic stability, and financial system efficiency are identified as the three main objectives of financial regulation and represent the benchmarks for the analysis. The paper analyzes how well and how efficiently the specialized and integrated approaches to regulation facilitate the achievement of the three main objectives. Based on this analysis of the integrated and specialized approaches, the paper finds good reasons for the adoption of an integrated approach in circumstances similar to those prevailing in most Latin American and Caribbean countries.
The study breaks grounds in assessing the cost and benefits of different supervision regimes in the region and prompts additional research in this field. The issue of an integrated versus a specialized approach to financial regulation is particularly relevant for the countries of Latin America and the Caribbean, some of which have already started to move towards an integrated approach. We believe that this study will greatly contribute to promote an active discussion on this issue and to reach conclusions for the implementation of institutional reforms in the supervisory frameworks of countries in our region.
To obtain a hard copy of this publication, please submit your request to:
IFM Publications
Infrastructure and Financial Markets Division
Inter-American Development Bank
1300 New York Avenue, N.W.
Washington, D.C. 20577
Mail Stop W-0508
E-mail: sds/ifm@iadb.org
Fax: 202-623-2157
Last updated: 06/01/07
