Bezpieczny Bank

Faculty of Management, Warsaw University of Technology

Financial market supervision: recent developments and challenges ahead

Abstract

Supervision of the financial markets has become over the last twenty years or so, an increasingly important element of the financial system. It is progressively moving away from passive compliance checks, towards becoming a real and active influence of the financial markets. It is encompassing a growing range both of issues and entities and is undertaking an ever-deeper insight. Financial supervision is also increasingly acquiring regulatory powers through the extensive application of self-produced ‘soft’ regulatory norms as well as accumulation of resources. (proliferating particularly after the recent global financial crisis). The goal of this article is to provide a systematic review of principal challenges currently facing financial supervision. The article is split into three parts. Its first part discusses the theoretical foundations of the supervisory system trying to indicate the sources of its powers, including its societal role. It deserves more attention in view of the unprecedented powers acquired by supervisors over supervised institutions and the financial markets. In the second part we take a close look at the changing supervisory paradigm in its current form. The third part reviews the new challenges facing financial supervision in its search for innovations which adapt to new requirements, and the available opportunities in the development of its new toolkit.

Key words: supervisory paradigm, supervisory toolbox, macroprudential approach

JEL: G18, G22, G28

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