I POLICY **RESEARCH WORKING PAPER** 3096

# Abstract

Despite the intense debate on the advantages and disadvantages of adopting integrated supervision that has taken place in recent years, little is known about the experiences of countries that have adopted it and the obstacles and challenges they have faced to implement it. In an attempt to shed !l.ght on this area, de Luna Martinez and Rose present the results of a survey conducted in a group of 15 countries that have adopted integrated supervision. After a brief review of the literature on integrated supervision, the authors examine four topics:

* The reasons cited by this group of countries for establishing an integrated supervisory agency.

* The scope of regulatory and supervisory powers of these agencies.

* The progress of these agencies in harmonizing their regulatory and supervisory practices across the intermediaries they supervise.

* The practical problems faced by policymakers in adopting integrated supervision.

The survey revealed that the group of integrated supervisory agencies is not as homogeneous as it seems. Important differences arise with regard to the scope of regulatory and supervisory powers the agencies have been given. In fact, contrary to popular belief, less than 50 percent of the agencies can be categorized as megasupervisors. Another finding is that in most countries progress toward the harmonization of prudential regulation and supervision across financial intermediaries remains limited. Interestingly, the survey revealed that practically all countries believe they have achieved a higher degree of harmonization in the regulation and supervision of banks and securities companies than between banks and insurance firms. The survey also identified some practical problems faced by this group of countries in establishing their unified supervisory agencies. The authors discuss these problems, along with the practical lessons and recommendations provided by the 15 agencies to other countries considering integrated supervision, in the final section of the paper.

This paper-a product of Financial Sector Operations and Policy Department-is part of a larger effort in the department to analyze recent developments in financial sector regulation and supervision. Copies of the paper are available free from theWorld Bank, 1818 H StreetNW,Washington, DC 20433. Please contactSusana Coca, roomMC9-757, telephone 202473-7474, fax 202-522-3475, email address scoca@worldbank.org. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at jdelunamartinez@worldbank.org or trose@worldbank.org. July 2003. (44 pages) _The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings_ **_out_** _quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should_ **_be_** _cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent._ Produced by the Research Support Team