What are the perils of separating banking regulation from the central bank's orbit in Latin America and the Caribbean?
| Pages | 70-83 |
| Published date | 01 January 2006 |
| DOI | https://doi.org/10.1108/13581980610644770 |
| Date | 01 January 2006 |
| Author | Edgardo Demaestri,Federico Guerrero |
| Subject Matter | Accounting & finance |
What are the perils of separating
banking regulation from the
central bank’s orbit in Latin
America and the Caribbean?
Edgardo Demaestri
Infrastructure and Financial Markets Division, Inter-American Development
Bank, Washington, District of Columbia, USA, and
Federico Guerrero
Department of Economics, College of Business Administration, University of
Nevada, Reno, Nevada, USA
Abstract
Purpose – Aims to review the potential risks associated with the separation of banking regulation
from the orbit of the central bank in Latin-American and Caribbean countries (LAC).
Design/methodology/approach – Sets out information on the banking regulators in LAC and on
the current degree of involvement of the central bank in banking regulation; the main monetary policy
issues connected to the separation of banking regulation from the central bank; and the main banking
regulation issues involved.
Findings – The separation of banking regulation from the central bank would not present any great
danger to LAC currently. However, the need to conduct the move in accordance with best principles
must be emphasized.
Originality/value – Given the fertile ground offered by the countries of LAC, this paper presents
arguably the most comprehensive examination to date of this “hot potato”.
Keywords Financial control,Financial markets, Central banks,Latin America, Caribbean
Paper type General review
1. Introduction
What are the perils of separating banking supervision from the central bank? Are those
risks significant for the countries of Latin America and the Caribbean (LAC)?
In practice, the most usual way in which countries face the “separation dilemma” is
when integrating their specialized financial regulatory agencies into a single entity
(Abrams and Taylor, 2002), a situation that has become more common in the last
decade (Masciandaro, 2004; Garcı
´a, 2002; Demaestri and Guerrero, 2005 for the case
of LAC).
This paper approaches the separation of banking regulation from the central bank
from two perspectives: monetary policy and banking regulation issues. While
maintaining theoretical generality in our discussion, the examples provided are
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
The authors thank David Lewellyn for his insightful written comments. They also thank Clive
Briault, Ricardo Bebczuk, Tom Cargill, and Norman Loayza for their useful feedback. A
presentation before the Chilean Comite
´de Superintendentes in the context of a reserved working
session also provided useful discussion. Errors and omissions are their own responsibility.
JFRC
14,1
70
Journal of Financial Regulation and
Compliance
Vol. 14 No. 1, 2006
pp. 70-83
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980610644770
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