BANKING REGULATION AND ITS SUPERVISORY BODY

Abstract

Public supervision of the financial system in general, and more particularly of the banking subsystem, the main sector of the financial system in Mexico, has four objectives: operational efficiency and competition, safety and soundness, monetary policy and efficiency in the allocation of resources, and protection of depositors. Appropriate banking supervision certainly allows intermediaries to assume risks, but on the basis that these are backed by an adequate level of capitalization, and that they are assumed within a reasonable prudential framework. The central issue is the development of skills on how exactly the financial system operates. Central bankers and their advisors can study the best analysis (but) there is no substitute, however, for the understanding of institutions and the operation of markets that comes from the very experience derived from the responsibility of real supervision.