Financial Regulators

From Open Risk Manual


A Financial Regulator is any entity, typically but not necessarily a ( public sector regulatory agency), that is responsible for the supervision or regulation of some aspect of the Financial System with the objective to ensure that the operation of that system remains within mandated constraints

Regulatory Matrix

There are several distinct regulatory activities which can be organized in a variety of ways [1]

  • Prudential Regulation, focussing on the safety and soundness of individual financial institutions whether they be banks, insurance companies or securities traders which may also be included within a financial conglomerate
  • Systemic Regulation and supervision designed to oversee the stability of the financial system as a whole and most especially the banking and payments system
  • Financial Consumer Protection, focussed on conduct-of-business arrangements designed to protect the consumer from factors such as incomplete information, bad practices by financial firms, unfair practices etc, and
  • Competition, designed to ensure that there is an appropriate degree of competition in the financial system and that anti-competitive practices by financial firms are abandoned.

Common Institutional Patterns

Financial regulators typically:

  • receive their mandate from and are accountable to the governing bodies of a Sovereign State and in turn all financial institutions operating within the geographical boundaries of that state are in principle under their remit
  • relations between the regulator, regulated entities and the government are fixed in the context of the applicable jurisdiction (laws)
  • may conduct regulation / supervision along silos or operate the Twin Peaks model

Issues and Challenges

  • Global standards and "level playing field"
  • Financial regulation within the European Union / Eurozone

See Also


  1. Institutional Structure of Financial Regulation and Supervision, D. Llewellyn, 2006