A Research On The Organizational Structure Of Financial Supervision

Before 1980s, the organizational structure of financial supervision had not been a hot area. The variety of organizational structures adopted by different countries was considered to be the result of the evolution against different background of these countries. Recently, the rapid progress of the financial industry has led the revolution of the organizational structure of financial supervision in many countries, including Scandinavian countries, UK and Canada, etc. They separated the central bank's supervision function and built a unified supervisor, implementing an integrated financial regulation and supervision arrangements. That has seemed to be a trend and the issues of the institutional arrangements of financial regulation and supervision have intrigued great concerns. The same debate concerned the arrangements of organizational structure of financial supervision in our country has been intrigued due to the great changes of financial industry that have taken place since our entry to WTO. This paper, which consists of three sections, intends to put forward to some practical suggestions for our country based on the theoretical analysis of the integrated supervision framework. Generally speaking, currently there are three kinds of organizational structure of financial supervision: integrated mega-regulation, separated multilateral regulation and semi-integrated regulation. The separated regulation model arranged according to the separation of the banking, security and insurance had been the traditional one in most countries before 1980s. However, in recent years many developed countries including UK, Canada separated the banking supervision from the central bank and integrated their financial supervision agencies into one. Section two firstly summarizes the current arrangements across the various countries around the world and the representative countries adopting the integrated supervision. Then it analyzes the driving forces and historical background behind the transition. Section two consists of three parts. Part one mainly deals with the question that why the integrated mega-regulation is adopted. The supporters argue that: one integrated supervision authority can gain the profits of economies of scale and scope and avoid the supervision and regulation conflicts and overlaps; it can also improve the competitive equalities in financial market with a more consistent regulatory rules. The arguments against the integration of the supervisory agencies are also strong: the profits gaining from economies of scale and scope can be lost in many aspects; the internalization of the supervision conflicts can cause the deviation from the social optimum; the implementation of same supervision rules can cause the new risks and inefficiencies due to the omission of differences of the financial activities and institutions; finally, some economists worries about the centralization of the powers arising from the integrated supervisor. Part two discusses another hot question concerned with the integrated supervision: should the financial supervision, in most cases the banking supervision, be separated from the central bank? Three reasons supporting the separation includes: firstly, it is believed there be interest conflicts between the monetary and financial supervision policies; secondly, the separation can reduce the possibility of the moral hazards brought by the least lender role of the central bank; finally, the separation can restrict the increasing power of the central bank. The arguments against the separation includes: firstly, the central bank being in charge of both the monetary policy and financial regulation policy can facilitate the coordination of them and achieve better effects; secondly, although the approach of the lender of last resort tends to incur moral hazards, there is no better mechanism to control the systemic risks or...