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. the second main stream is full unification of the supervision of banks, securities companies and insurance companies, all in one institution. the trend since some 15 years is that bank supervision in a number of countries has been moved outside the ncb and has been consolidated with the supervision over securities and insurance companies. however, the most common structure is still the traditional one 1. martin cihak and richard podpiera : imf working paper wp / 06 / 57 from 2006. but there are many variations. one is the combination of banking and securities supervision, which is logical due to the close relations between banking and securities activities. another is the combination of securities and insurance supervision with the aim to create a stronger authority with more resources and expertise. there are also some broader alternatives. the fsa in the uk performs supervision over a wide range of financial institutions, including brokers, pension funds and many more. its objectives also include financial sector consumer issues and even the promotion of london as a financial market place. all kinds of supervision and other activities related to the financial sector are placed under one roof. the netherlands, australia and others have followed an approach based on the purpose of the supervision. in these countries prudential supervision of banks and securities firms is conducted separately from the oversight of the conduct of the financial markets. the underlying rationale is that these activities are different. ensuring the safety and stability of banks and securities firms requires different regulations and skills from monitoring market conduct and taking enforcement actions. ireland, france, finland and others have retained bank supervision in an organisation closely related to the central bank but not in the central bank itself. in this way they benefit from the resources of the ncb and can make some cost savings, but avoid some of the arguments against locating supervision in the ncb itself. other countries, among them germany, have a stand - alone authority for financial regulation but the central bank maintains a role in the conduct of supervision by conducting most of the on - site inspections of banks. in this way the bundesbank benefits from its vast network of regional branch offices and its knowledge of the local economy. criteria for evaluating the organisation of supervision the choice of structure for supervision is not an end in itself but a means to achieve certain objectives. we should therefore

without compensating improvements in other sectors. there are other ways of meeting the challenge. many countries have instituted arrangements for closer cooperation between the supervisors. memorandas of understanding have been drafted so that information may be shared without legal or other impediments. joint forums have been established where representatives from the different supervisory authorities meet regularly. cross directorships imply that high level supervisors sit on each others ’ boards and can inform themselves of developments. in fact, legislation might be necessary in order to ensure that the ncb can always obtain the information it needs to fulfil its responsibilities on financial stability, extraordinary liquidity assistance in a crisis, and monetary policy. in sweden, the central bank concluded an mou with our bank supervisors but we also have the legal power to ask the banks directly for information. it is difficult to sum up all the arguments for and against. if you are contemplating change in your country, i would say that a broad and objective assessment of the present strengths and weaknesses will give good guidance as to which way to go. the optimal solution for the near term may not be the same as for the long term. the aspects of cross - border supervision financial institutions increasingly operate across national borders. they establish branches and subsidiaries in other countries and they have business linkages with institutions in other countries. is there any structure of the domestic regulatory authorities that is particularly suited to the efficient supervision of international financial operations? i do not think so. what matters is that there are arrangements between home and host supervisors which ensure information - sharing and close cooperation in particular in crisis situations. such arrangements can be agreed on whether bank supervision is in a central bank or combined with securities and insurance supervision in a separate authority. that said, roger ferguson, a former member of the fed board and chairman of the fsf, argues that the well established global network among central banks, such as through the bis, gives central banks a comparative advantage in informal information sharing and cooperation 5. which role remains for the central bank? ensuring jobs for the central bank staff is not a valid reason for retaining bank supervision in the ncb. hence, the question is : which would be the primary tasks of the ncb if supervision is moved out? of course, the task of conducting monetary policy would remain with the ncb. the ncb will also run the large - value payments system, or at least exercise oversight over it. in addition, the ncb should always have the responsibility for the oversight of overall stability