XML

Seoul Journal of Economics - Vol. 22 , No. 3
[Paper List] [Go to Volume List]

[ Article ]
Seoul Journal of Economics - Vol. 22, No. 3, pp. 409-444
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2009
Received 27 Apr 2009 Revised 05 Aug 2009

Cooperation and Coordination between the Financial Authorities: A Review of the Experiences of the United Kingdom, Norway, Sweden, and Korea
Hong-Bum Kim
Professor, Department of Economics, College of Social Sciences, Gyeongsang National University, Chinju, Kyungnam 660-701, Korea, Tel: +82-55-751-5747 (hbkim@gnu.ac.kr)

Funding Information ▼

JEL Classification: D73, E02, E58

Abstract

As far as institutional collaboration between the financial authorities in pursuit of financial stability is concerned, Korea has remained seriously backward. Although the issue is widely regarded as important, scholars and policymakers in Korea have tended to stop short of putting microscopic lenses to it. Presented is a comparative review of the experiences of the United Kingdom, Norway, and Sweden, all of which, like Korea, have adopted the regime of integrated financial supervision. The paper finds that in Norway and in Sweden institutional collaboration is more about substance and practice over form and procedure, whereas the opposite is true in the United Kingdom. Policy implications to Korea as well as a couple of tentative interpretations of these findings are discussed.

Keywords: Institutional collaboration, Financial authorities, Financial stability, General MoUs, Special MoUs
Acknowledgments

This work was supported by the Korea Research Foundation Grant funded by the Korean Government (MOEHRD, Basic Research Promotion Fund) (KRF-2006-321-B00328). Part of this paper was written when the author stayed at the Bank of Korea as a visiting scholar early in 2008. Special thanks go to those at the Bank of Korea, Financial Supervisory Service, Finansinspektionen, Kredittilsynet, Norges Bank, and at Sveriges Riksbank, who provided the author with useful information, comments or answers in response to his inquiries at various stages of this research. Finally, the comments made on an earlier version by Mr. Arild J. Lund of Norges Bank and by two anonymous referees of this Journal are acknowledged.

References
1. Bank of England. Memorandum of Understanding for Financial Stability. News Release, March 22, 2006.
2. Bank of England, HM Treasury, and Financial Services Authority. Financial Stability and Depositor Protection: Further Consultation. A Reform Proposal Presented to Parliament by the Chancellor of the Exchequer by Command of Her Majesty, July 2008.
3. Bank of Korea. The Bank of Korea Act. www.bok.or.kr, April 23, 2008.
4. Bank of Korea. 20 Questions and Answers on Revising the Bank of Korea Act. Documentation for Internal Use, March 2009 (in Korean).
5. Borio, Claudio. Towards a Macroprudential Framework for Financial Supervision and Regulation? BIS Working Paper No. 128, February 2003.
6. Borio, Claudio. The Macroprudential Approach to Regulation and Supervision: Where Do We Stand? A Paper that Appears as Chapter 7 in Experiences and Challenges, the Special Volume Published in Celebration of the 20th Anniversary of Kredittilsynet, September 1, 2006.
7. Borio, Claudio, Moe, Thorvald G., Okawa, Masao, and Santos, Joao A. C. Central Bank Involvement in Safeguarding Financial Stability: Facts and Some Outstanding Issues. Background Document for an ad hoc Meeting of Central Banks held at the Bank for International Settlements, February 9-10, 1999.
8. Chung, Un Chan, and Kim, Hong-Bum. Money and Financial Markets. 3rd ed., Yulgok Publishing Co., March 2007 (in Korean).
9. Crockett, Andrew. Marrying the Micro- and Macro-prudential Dimensions of Financial Stability. Remarks Given before the 11th International Conference of Banking Supervisors, Basel, September 20-21, 2000.
10. Ecklund, Gunhild J., and Knutsen, Sverre. Protection against Crises?: A Century of Financial Supervision in Norway. Center for Business History, Norwegian School of Management BI, June 2001.
11. ECOFIN Council. Memorandum of Understanding on Cooperation between the Financial Supervisory Authorities, Central Banks and Financial Ministries of the European Union on Cross-Border Financial Stability. ECFIN/CEFCPE (2008) REP/53106, The European Union, June 1, 2008.
12. Edaily. Why the BOK Governor Said: ‘They Did Not Give Information.' www.thinkpool.com, April 23, 2009.
13. Financial Services Authority. The Turner Review: A Regulatory Response to the Global Banking Crisis. March 2009.
14. Financial Stability Forum. Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience. www.fsforum.org, April 7, 2008.
15. Financial Stability Forum Working Group on Deposit Insurance. Interrelationships. Guidance for Developing Effective Deposit Insurance System, Vol. II, pp. 93-8, September 2001.
16. Financial Supervisory Service. The Manual on the Procedures for a Joint Examination with the Bank of Korea and the Korea Deposit Insurance Corporation. Documentation for Internal Use, January 2008 (in Korean).
17. Financial System Stability Department of the Bank of Korea. The MoUs of Major Countries between the Public Agencies Involved in Financial Stability. Korean Translation of the MoUs of Some Major Countries with the Original English Versions Attached, Documentation for Internal Use, February 2007 (in Korean).
18. Finansinspektionen and the Sveriges Riksbank. Agreement between Finansinspektionen (the Swedish Financial Supervisory Authority) and Sveriges Riksbank in the Division of Labor and Cooperation with regard to Financial Stability and Efficiency. February 2003.
19. Goodhart, Chalres A. E. The Regulatory Response to the Financial Crisis. LSE Financial Markets Group Paper Series Special Paper, No. 177, February 2008.
20. Goodhart, Charles A. E., Hartman, Philipp, Llewellyn, David, Rojas Suárez, Liliana, and Weisbrod, Steven. Financial Regulation: Why, How and Where Now? London and New York: Routledge, 1998.
21. Hawkesby, Christian. “Central Banks and Supervisors: The Question of Institutional Structure and Responsibilities.” In Liisa Halme, Christain Hawkesby, Juliette Healey, Indrek Saapar, and Farouk Soussa (eds.) Financial Stability and Central Banks: Selected Issues for Financial Safety Nets and Market Discipline. Center for Central Banking Studies, Bank of England, pp. 95-128, May 2000.
22. Hayward, Peter. The Financial Sector ― The Responsibilities of the Public Agences. The Monetary and Exchange Affairs Department Operational Paper, MAE OP/00/XX, International Monetary Fund, October 2000.
23. Healey, Juliette. “Financial Stability and Central Banks: International Evidence.” In Peter Sinclair and Juliette Healey (eds.), Financial Stability and Central Banks: A Global Perspective. Central Bank Governors’ Series, Routledge, Chapter 2, pp. 19-78, 2001.
24. HM Treasury, the Bank of England and the Financial Services Authority. Memorandum of Understanding between HM Treasury, the Bank of England and the Financial Services Authority. October 1997.
25. HM Treasury, the Bank of England and the Financial Services Authority. Memorandum of Understanding between HM Treasury, the Bank of England and the Financial Services Authority. March 22, 2006.
26. International Monetary Fund. Sweden: Financial System Stability Assessment, including Reports on the Observance of Standards and Codes on the Following Topics: Monetary and Financial Policy Transparency, Banking Supervision, Securities Regulation, Insurance Regulation, and Payment System. IMF Country Report No. 02/161, August 2002.
27. International Monetary Fund. United Kingdom: Financial System Stability Assessment, Including Reports on the Observance of Standards and Codes on the Following Topics: Banking Supervision, Insurance Supervision, Securities Regulation, Payments Systems, Monetary and Financial Policy Transparency, Securities Settlement Systems, and Anti-Money Laundering and Countering Terrorist Financing. IMF Country Report No. 03/46, February 2003a.
28. International Monetary Fund. Republic of Korea: Financial System Stability Assessment, including Reports on the Observance of Standards and Codes on the Following Topics: Monetary and Financial Policy Transparency, Banking Supervision, Securities Regulation, Insurance Regulation, Corporate Governance, and Payment Systems. IMF Country Report No. 03/81, March 2003b.
29. International Monetary Fund. Norway: Financial System Stability Assessment. IMF Country Report No. 05/200, June 5, 2005a.
30. International Monetary Fund. Financial Sector Assessment: A Handbook, 2005b.
31. JoongAng Ilbo. Economic Ministries with No Control Tower. September 22, 2008 (in Korean).
32. Kim, Dae Sik, Kim, Kyung Soo, Kim, Hong-Bum, and Lee, Seok Won. Suggestions to Improve the Deposit Insurance System in Korea. An Unpublished Report of the Research Project that Was Commissioned by and Submitted to the Korea Money and Finance Association, December 2002 (in Korean).
33. Kim, Dae Sik, and Yoon, Suk Heun. “The Transformation of the Korean Financial Supervisory Authority since Integration and Some Reform Guidelines.” Journal of the Korea Money and Finance Association 10 (No. 1 2005): 201-39 (in Korean).
34. Kim, Hong-Bum. Financial Supervision in Korea: Diagnosis and Prescription. Seoul: Dunam Publishing Company, May 2002 (in Korean).
35. Kim, Hong-Bum. The Political Economy of Financial Supervision in Korea. Seoul: Jisik Sanup Publications Co., June 15, 2004a (in Korean).
36. Kim, Hong-Bum. “Financial Stability and the Public Agencies Concerned: The Case for Supervisory Cooperation and Checks and Balances.” Institute for Monetary and Economic Research, The Bank of Korea, Economic Papers 7 (No. 2 December 2004b): 20-60.
37. Kim, Hong-Bum. Reforming the Institutional Structure of Financial Supervision in Korea: Why Is Government-Led Financial Supervision Bound to Fail? Seoul: The Seoul National University Press, August 25, 2006 (in Korean).
38. Kim, Hong-Bum. “Financial Supervision and Public Sector Governance in Korea.” A Paper that Appears as Chapter 6 In Jeong-Ho Hahm (ed.), The New Paradigm for Finance in Korea. S&R Institute for Economics and Business Administration, pp. 329-411, December 2008 (in Korean).
39. Kim, Hong-Bum. Financial Reform and the Government: The Australian Experiences in the Mid-1990s and their Implications to Korea. A Paper Financially Supported by and Submitted to KDI, March 2009 (in Korean).
40. Kim, Hong-Bum, and Lee, Chung H. “Financial Reform, Institutional Interdependency, and Supervisory Failure in Postcrisis Korea.” Journal of East Asian Studies 6 (No. 3 2006): 409-31.
41. Kwon, Jae-Jung. “Financial Reform in Korea: The Unfinished Agenda.” Seoul Journal of Economics 17 (No. 3 2004): 403-37.
42. La Porta, Rafael, Lopez-de-Silanes, Florencio, Shleifer, Andrei, and Vishny, Robert W. “Law and Finance.” Journal of Political Economy 106 (No. 6 1998): 1113-55.
43. Maeil Business Newspaper. Financial Cooperation: FSS Comforts BOK. http://news.mk.co.kr, June 17, 2009 (in Korean).
44. Masciandaro, Donato. Reforms of Financial Supervision Regimes and Central Banks: Exploring the Nexus. A Paper Presented to the Conference Titled “Macroprudential Supervision: Challenges for Financial Supervisors” and Organized by IMF and FSS/FSC, Seoul, November 7-8, 2006.
45. Masciandaro, Donato, Quintyn, Marc, and Taylor. Michael W. Financial Supervisory Independence and Accountability ― Exploring the Determinants. International Monetary Fund Working Paper, WP/08/147, June 2008.
46. Norges Bank. Annual Report 2006, 2007.
47. Norges Bank and Kredittilsynet. Broader Collaboration between Norges Bank and Kredittilsynet. A Letter Submitted to the Ministry of Finance, April 26, 1993.
48. Norges Bank and Kredittilsynet. Review of Collaboration between Kredittilsynet and Norges Bank. A Letter and Its Attachment Submitted to the Ministry of Finance, April 22, 1997.
49. Norges Bank and Kredittilsynet. Account of the Cooperation between Kredittilsynet and Norges Bank. A Letter and Its Attachment Submitted to the Ministry of Finance, March 19, 2001.
50. Norges Bank and Kredittilsynet. Follow-up to IMF’s Financial System Stability Assessment (part of FSAP). A Letter Submitted to the Ministry of Finance, December 16, 2005a.
51. Norges Bank and Kredittilsynet. Report on Cooperation between Kredittilsynet (Financial Supervisory Authority of Norway) and Norges Bank on Financial Stability and Crisis Management. A Report Which Was Attached to the Letter Titled “Follow-up to IMF’s Financial System Stability Assessment (Part of FSAP)” and Was Submitted to the Ministry of Finance, December 16, 2005b.
52. Peek, Joe, Rosengren, Eric S., and Tootell, Geoffrey M. B. “Is Bank Supervision Central to Central Banking?” The Quarterly Journal of Economics 114 (No. 2 1999): 629-53.
53. Quintyn, Marc, Ramirez, Silvia, and Taylor, Michael W. The Fear of Freedom: Politicians and the Independence and Accountability of Financial Sector Supervisors. International Monetary Fund Working Paper, WP/07/25, February 2007.
54. Taylor, Michael W., and Fleming, Alex. Integrated Financial Supervision: Lessons from Northern European Experience. Policy Research Working Paper, No. 2223, World Bank, November 1999.
55. The de Larosière Group. The Report of the High-Level Group on Financial Supervision in Europe. February 25, 2009.
56. The Economist. The Bank of England: Credibility at Stake. London: The Economist, pp. 65-6, June 14, 2008.
57. The Swedish Ministry of Finance, Sveriges Riksbank and Finansinspektionen. Memorandum of Understanding between the Government Offices (Ministry of Finance), Sveriges Riksbank and Finansinspektionen Regarding Co-operation in the Fields of Financial Stability and Crisis Management. June 2005.
58. The United States Department of Treasury. Financial Regulatory Reform: A New Foundation, June 17, 2009.
 

Editorial Office, Seoul Journal of Economics, Institute of Economic Research, Seoul National University 599 Gwanangno, Gwanak-gu, Seoul 151-746, Korea
Tel: +82-2-880-5434 | Fax: +82-2-888-4454 | E-mail: sje@plaza.snu.ac.kr
Copyright (c) 2020 SJE. All rights reserved.