Policy Lessons for Prudential Regulation in Developing Countries

Martin Brownbridge

Development Policy Review, 2002, vol. 20, issue 3, 305-316

Abstract: This article draws together the regulatory policy lessons arising from the Finance and Development Research Programme's project on prudential regulation and supervision of the financial sector in low‐income countries. The policy recommendations include: bringing regulations, such as loan provisioning rules, into line with international standards, where this has not already been done; tightening bank licensing procedures and raising minimum capital requirements; introducing ‘prompt corrective action rules’; providing the regulators with an unambiguous mandate to protect deposits and the stability of the financial system; enhancing the regulators' independence from political interference in operational issues but making them more accountable ex‐post; introducing risk‐based supervision; and limiting deposit insurance to small deposits only.

Date: 2002
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