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Financial Supervision Mechanism

Financial Supervision Mechanism. David Kozelský MA1N0219 Financial Management. Agenda. Norway system in the CR Decision-making status quo Disadventage of the model Adventages of the model Management changes in 2008. Norway system in the CR.

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Financial Supervision Mechanism

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  1. Financial Supervision Mechanism David Kozelský MA1N0219 Financial Management

  2. Agenda • Norway system in the CR • Decision-making status quo • Disadventage of the model • Adventages of the model • Management changes in 2008

  3. Norway system in the CR • In 1986 Norway became the first countryto integrate all supervision activities into one authority (Kredittilsynet). • The model of integrated financial supervision within theframework of the central bank is characterized by integration ofmonetary policy and all supervisory activities • After the revolution (1989) CR has tried to overtake this model – one authority - CNB (Central National Bank), succesfuly accepted in 2006 • This model is characterized bya very close personnel and information connection between the monetary policy and supervisory activities.

  4. Decision-making status quo • Decision-making power within supervisory process is held by supervisory department management. • Monetary policy and supervisory activities are strictly separated. • The supervisory institution is not a part of the central bank, neither another public administration body. • The financing system of the supervisory body has toensure its financial independence so that the institution can recruitqualified employees and acquire up-to-date technical instruments for supervisory activities performance.

  5. Disadventages of the model • Central Bank is an active participant in bond market where thebank exercises at the same time its supervision • risk of damage to reputation of the Central Bank and efforts tomaintain the monetary authority credibility constitute limitations of supervisory activities • risk of conflict of interest between the monetary policy andsupervisory activities of the Central Bank • considerable concentration of power outside direct sphere of the government/parliament activity • conflict between the Central Bank’s independence, necessary for • monetary policy performance

  6. Adventages of the model • Independent financing, separate from state budget • Usage of Central Bank’s infrastructure not only for the monetary policy • Efficient information flows between the banking supervision andmonetary section of the Central Bank • Elimination of risk of communication noise and information rigidity • Compensation for the loss of Central Bank’s competences inprudential supervision with respect to the EU principle of home country supervision • More efficient international cooperation

  7. Management changes in 2008 • Starting from the beginning of 2008, the Central Bank’smanagement changed the sector-oriented organization, to regroup thedepartments internally and create three new departments • FinancialMarket Regulation and Analysis Department • Licensing and EnforcementDepartment • Financial Market Supervision Department

  8. Have a nice day!

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