The future of regulation of the financial services industry: from control instruments to certification requirements

Arnoud Boot, Silva Dezelan and Todd T. Milbourn

Proceedings, 1998, issue Sep

Abstract: This paper advocates a shift in regulatory design in light of the increasingly competitive and dynamic environment of banking. Intrusive, control-oriented direct and indirect approaches to regulation have become increasingly costly. We advocate regulation that focuses on setting minimum requirements, i.e., certification requirements. Supervision would then primarily aim at verifying compliance. The viability of this approach requires a well-developed financial system and adequate internal control systems, primarily to align incentives within institutions. The analysis includes an industrial organization model that formally examines the distortionary costs of regulation and an analysis of regulation in the context of emerging economies.

Keywords: Bank supervision; Competition (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfpr:y:1998:i:sep:x:9

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