International Financial Supervisory Convergence: How Much Should there Be? How Best to Assess the Appropriate Level of Cross Border Supervision and Enforcement?

Abstract

Taxpayers’ money may not be put at risk again. Financial firms have to be efficiently supervised in order to make the financial sector more resilient against any future market turmoil. Efficient supervision can be achieved only when timely and accurate information is constantly assessed by independent bodies. In case of a significant breach of rules, proper sanctioning mechanism and enforcement is necessary. The supervisory structure is under constant development. Recently, macro-prudential and micro-prudential supervisory structures have been endorsed. In the European Union, the oversight goes even further and a banking union is discussed. The Financial Stability Board has also introduced new mechanisms and identifies key approaches. The paper analyses the recent supervisory developments and examines whether an upgraded supervisory approach could make the financial markets more resilient against another massive financial disaster.