The scandals that have tarnished the reputation of Wall Street and in Italy have damaged those who have invested their savings in Parmalat or Cirio corporate bonds or in Argentinean Government securities justify revisiting the objectives to be achieved by regulation and supervision of the financial sector. Stability is still regarded as paramount for banking, to be secured through an appropriate capital cushion, extensive supervisory arrangements, and market discipline, as agreed by Basel 2. Other financial intermediaries need to conduct their business with great transparency, openness and respect of the rules. However, an ever expanding and innovative financial sector, the blurring of traditional segmentations and globalisation make the task of regulating and supervising the financial sector more difficult and challenging, thus requiring new frameworks, for instance a single agency, in various jurisdictions and more international co-ordination and co-operation among regulating and supervising agencies. Up to now, the approach followed by the latter has been microeconomic, but the growing financial instability and the greater relevance of systemic risk may ask for a macroeconomic management of prudential regulation and supervision, thus complementing monetary policy in securing financial stability.

JEL Codes: E52, G18, G21, G28

Keywords: Banking; Regulation; Securities