Abstract
AbstractIn this chapter, the drivers of the formalization of banking supervision are examined from seven perspectives: (a) charter requirements, (b) banknote issuance, (c) liability rules, (d) ensuring the public’s trust, (e) financial crises, (f) economic control, and (g) financial globalization. Our analysis shows that formalization occurred in response to the shifting needs of the time/era and that the formalization process was basically incremental. Notably, financial crises, which are generally considered to be the primary drivers of major regulatory and supervisory reforms, did not always play a leading role in the formalization of banking supervision. It should also be noted that from a historical perspective, regulation and supervision were not “natural” responses to a dysfunctional banking system. Rather, the formalization of banking supervision was the product of complex political actions negotiated by relevant stakeholders with divergent interests in a specific social, political, and economic environment.
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