Search results

1 – 1 of 1
Per page
102050
Citations:
Loading...
Access Restricted. View access options
Article
Publication date: 4 November 2013

Tom Patrik Berglund

– This paper aims to discuss factors that affect the socially optimal jurisdiction of financial supervision in the presence of economies of scale in banking.

485

Abstract

Purpose

This paper aims to discuss factors that affect the socially optimal jurisdiction of financial supervision in the presence of economies of scale in banking.

Design/methodology/approach

Analysis of the trade-off between likelihood of “regulatory capture” of supervisors in a small jurisdictions and benefits of greater rates of financial innovation in a less-bureaucratized and more diverse supervisory organization.

Findings

The challenge is to create a financial supervisory institution that should be powerful enough to close down even the largest financial institutions within its jurisdiction, while at the same time not becoming so large and omnipotent that it would stifle further development of firms in financial services.

Research limitations/implications

Deeper understanding of minimum efficient scales in financial intermediation required, and of regulatory capture vs efficient information acquisition from regulated units.

Practical implications

Basis for international (regional) cooperation in facilitating efficient delivery of financial services, in particular in smaller countries.

Originality/value

Developments in information technology have fundamentally changed the ways financial intermediaries operate paving the way for giant units that in key areas are able to outcompete smaller business units. The financial crisis that started in 2008 revealed that these large and interconnected organizations are in a position to extract implicit subsidies from the rest of the society. The organization of financial supervision must adapt to these changing conditions.

Details

Journal of Financial Economic Policy, vol. 5 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

1 – 1 of 1
Per page
102050