My main conclusion is that there is no optimal solution for all cases; it depends on the circumstances in the individual country at the present moment. Ensuring operational independence, accountability and transparency for the supervisory agencies are more important than how they are structured. If your country has a well functioning banking supervision do not change its structure until you have clear arguments to do so. Do not make structural changes when the financial sector is weak or recovering from a crisis. On the other hand, developments in your financial sector such as an increasing role for other institutions than banks, argue for closer ties between the supervisory agencies. There are two basic issues in the discussion on the organisation of supervision: •  Should supervision be inside or outside the NCB and the Ministries? •  Should supervision of different sectors be unified in the same authority? These questions will be discussed later in my presentation. Let me first describe some of the present practices in organising supervision. Present practices Currently there is a great diversity of supervisory structures but the majority comes under one of the two main streams: The first is the traditional one with bank supervision in the NCB and securities supervision in an independent standalone authority. Insurance supervision is in many countries also located in a separate authority, but in other cases it is a department of the Ministry of Commerce or some other ministry.
As an example, it is more difficult to propose needed regulatory measures at the same time as promoting the growth of the financial market. To sum up: A country should be able to manage independence, accountability, transparency and efficiency satisfactorily in any kind of supervisory structure. For independence there might be some advantage with central bank supervision. But for cooperation leading to better efficiency there might be a slight advantage with a unified authority. Arguments for and against various supervisory structures After having discussed the conditions for good supervision let me now review some of the arguments for and against the various actual supervisory structures. I will first address the issues of having supervision inside or outside the ministries and the central banks. I will then turn to the arguments for and against unified authorities. Supervision inside ministries may provide some benefits in the form of insight and staff expertise, maybe also access to resources. But there is a strong disadvantage in the lack of independence plus the risk to the public’s confidence in the government if failures should occur in the supervised sector. There is also a serious governance issue in those countries where the government is the owner of financial institutions and also supervises them. Arguments for retaining supervision in the NCB What about supervision inside the NCB? First, banks have a special importance in the financial system. Their activities are often complex. Therefore, they need high quality, resource-intensive supervision. The NCB normally has independence and revenues.