Financial regulatory authority

A financial regulatory authority or financial supervisory authority is a public authority whose role is to ensure the proper implementation of financial regulation within its scope of responsibility.

Financial regulatory authorities include those in charge of bank supervision; of securities regulation, often referred to as securities commissions; of anti-money laundering supervision of financial firms; and of consumer protection in financial services, and more generally of enforcing "conduct-of-business" requirements, not to mention macroprudential regulation.

Scope of authority

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Functional scope

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Some or all of these distinct mandates are often brought together in a single authority. Different jurisdictions have addressed the challenge of organizing financial regulation in multiple ways that have often evolved over time and display significant path dependence. In general, three types of financial supervisory architecture have been identified by scholars:

  • a "sectoral" supervisory architecture (sometimes referred to as "institutional" or "functional"), in which different authorities are in charge of different sub-sectors of the financial system such as banking, insurance, and securities markets;
  • an "integrated" architecture in which a single authority is in charge of all segments of the financial system under all applicable policy frameworks;
  • a "twin peaks" architecture in which separate authorities are in charge, respectively, of prudential supervision and of conduct-of-business oversight.[1]

As of 2023, examples of sectoral architecture include Brazil, Hong Kong, and India; examples of integrated architecture include Japan, Russia, Singapore, Switzerland, and South Korea; and examples of twin-peaks architecture include Australia, South Africa, and the United Kingdom. China, the European Union, and the United States have more complex supervisory systems that defy simple classification.[2]

Geographical scope

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Whereas most financial regulatory authorities have a national mandate, there are instances of both subnational and supranational authorities:

In addition, both the European Securities and Markets Authority (since 2011) and the European Banking Authority (since 2023) have been granted direct supervisory mandates over limited market segments within the European Economic Area.

International organizations

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Several international or global bodies have financial regulatory authorities as their main membership. Given the variety of supervisory mandates and choices of supervisory architecture, the lists of members of these bodies occasionally overlap. These bodies include:

Financial regulatory authorities from several jurisdictions are also represented in the Financial Stability Board, alongside finance ministries and central banks.

National authorities

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See also

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Notes

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  1. ^ Andrew Godwin & Andrew Schmulow, ed. (2021). The Cambridge Handbook of Twin Peaks Financial Regulation. Cambridge University Press.
  2. ^ Martin Chorzempa and Nicolas Véron (March 2023), Will China's impending overhaul of its financial regulatory system make a difference? (PDF), Washington DC: Peterson Institute for International Economics