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Wednesday, October 9, 2002
Trend towards Consolidated Financial Supervisory Authorities (FSAs)
On April 1, 2000, Hungary merged four separate regulatory authorities into one institution - the Hungarian Financial Supervisory Authority - and thereby became the first CEE country to establish a consolidated financial supervisory authority. At that time, Dr. Laszlo Gyorgy Asztalos, President of the Hungarian State Supervisory Authority of Insurance between 1992-2000, drafted a paper entitled, "Independence of Financial Supervisory Authorities" for the publication series of Central European Banker Online.
(To download the report, please click on this hyperlink:
http://www.mkb.hu/english/download/ceb/2000/aszteng.pdf)
Ironically, although the Hungarian consolidated model was based on the British example, the UK Financial Services Authority began operations later than its Hungarian brainchild, namely on December 1, 2001. (The actual consolidation process in the UK took place between May 1997 and December 2001.) With over 10,000 companies, the UK has the largest financial market in Europe and the FSA some 2,000 employees to regulate it.
Denmark was the first EU country to embark on consolidated supervision: In 1988, Denmark established the Financial Supervisory Authority, merging several regulatory agencies supervising specific sectors such as banking and insurance. The Swedish Financial Supervisory Authority was established in 1991 and the Finnish Financial Supervisory Authority in 1993. As noted above, by 2000 the trend spread to CEE, with the establishment on April 1, 2000 of the Hungarian Financial Supervisory Authority.
While a number of European countries still have separate supervisory authorities for banking, capital markets, insurance and pension reform, the current trend among EU member states and candidate countries is towards consolidated supervision.
Consolidation of supervision mirrors the growth over the past decade of larger, horizontally-integrated financial institutions providing a wide range of services, including asset management, credit (business, consumer, institutional, mortgage and other), insurance and investment services. As the distinctions among financial institutions became blurred, a change in the regulatory regime became necessary. Proponents of consolidated supervision maintain that a consolidated authority can better supervise the many business segments of complex financial institutions. Furthermore, a consolidated authority also addresses issues such as acquisitions, mergers and takeovers; financial fraud; insider trading; and money laundering.
Please click on the hyperlink below to download the table which presents the situation in 15 countries as of September 1, 2002.
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