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Jordan discusses how the financial services industry is changing under new legislation, technology, and market consolidation, and asks two core questions about supervision and regulation. He explains that regulation establishes rules and political boundaries, while supervision provides post-rule monitoring, risk assessment, board support, and dissemination of industry best practices. The commentary argues the system must be modernized so supervisory and regulatory activities still serve their public purpose amid evolving risk and moral 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is the key difference between regulation and supervision?","Question",{"text":112,"@type":113},"Regulation refers to the rules and procedures set to govern an industry’s behavior, while supervision is the monitoring and oversight function carried out after those rules have been passed.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"Why does the author say the mission of regulation and supervision must change?",{"text":117,"@type":113},"Because changes in legislation, technology, mergers, and new financial products make the financial system dynamic, requiring modernization of the supervision and regulation framework to continue serving its public purpose.",{"name":119,"@type":110,"acceptedAnswer":120},"What problems can arise when government assigns core financial functions?",{"text":121,"@type":113},"The author highlights subsidy distortion and moral hazard, explaining that responsibilities like lender-of-last-resort roles and deposit insurance can misalign incentives and make risk-taking too cheap.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},321142,1790370522,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":44,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},4810365810221,"https://ap-avatar.wpscdn.com/davatar_155a257f0dc6eb9ab79c44ca47cae57d","by Jerry L.Jordan  \nWhenI was still in graduate school,more than 35 years ago,it would havebeen hard to persuade me that I wouldbe approaching the end of my careerbefore we started to think seriouslyabout the post-Glass-Steagall bankingenvironment.By the mid-1980s,when Iworked for a commercial bank on theWest Coast,I had become sufficientlydiscouraged by the slow pace of bankingreform that I thought I was making ajoke when I would say,\"The Berlin Wallwill probably come down before Glass-Steagall!\"\"Gramm-Leach-Bliley wassigned on November 12,1999.I hadbeen hoping it would be signed threedays earlier on November 9,whichwould have made it exactly on the tenthanniversary of the collapse of theBerlin Wall  \nBankers are no doubt still assessing theopportunities and strategic implicationsof Gramm-Leach-Bliley and the imple-menting regulationsAt the same time,they are still digesting the impact ofthe Internet and wireless technology,ongoing bank mergers,and newfinancial products.  \nBanking regulators and supervisors,forour part,are pondering the implicationsas well.We know the system of supervi-sion and regulation must be modernizedto keep pace with a dynamic financialservices industry.  \nTo begin to do that,we need to addresstwo basic questions.First,what publicpurpose do supervision and regulationultimately serve?Second,apart from leg-islation,what forces are driving change inthe financial services industry?We mustanswer these questions to anticipate howthe system of supervision and regulationmust change,so that these activities can  \n# Effective Supervision and the EvolvingFinancial Services Industry\n\naccomplish their public purpose withinthe new financial landscape.  \n# ■ Supervision and RegulationAre Different\n\nBefore we try to answer those questions,it is important to distinguish betweensupervision and regulation.These twowords are often used interchangeably,orin conjunction with one another,to implythat both relate to the same concept orprocess.That can't be further from thetruth.And,while we're distinguishingbetween the two,it might also be helpfulto reverse the order and refer to theseconcepts as \"regulation and supervision,\"since,as a practical matter,one typicallyfollows the other.  \nRegulation refers to the rules or proce-dures that are designed to govem anindustry's behavior.It is the prescriptionsor boundaries imposed on the industry bylegislators and regulatory bodies in aneffort to \"direct\"it.  \nRegulation takes place in a politicalcontext—democracies often use legisla-tion to encourage the things society as awhole likes(such as economic develop-ment)and discourage the things it doesn't(thus,the sin tax).As globalization andtechnology advance,financial institutionsbecome an easy target for additionalregulation;new regulations might be seenas a way of thwarting money laundering,achieving community development goals,or channeling credit to needy borrowers,for example.Such uses are often a temp-tation that leads regulation away fromits true mission—to help establish theboundaries within which an industrycan operate.  \nSupervision,on the other hand,is themonitoring or oversight function thattakes place after the regulations have  \nJune 2001*  \nTechnology,market consolidation,international competition,and newlegislation are changing the face ofthefinancial services industry.Howare the agencies responsible forensuring the safety and soundness ofour financial system responding?Jerry L.Jordan is president and chiefexecutive officer of the FederalReserve Bank ofCleveland.ThisCommentary is adapted from hiskeynote address to the 111th AnnualMeeting of the Ohio Bankers Associa-tion on May 31,2001.  \nbeen passed.It ensures,among otherthings,that activitiesare conducted inaccordance with those regulations.Banksupervision also involves assessing risk-management practices,helping boardsand management make informed deci-sions,and,most recently,spreading bestpractices of the industry.  \nWhile the distinction between regulationand superv","cbCaik4k9S23uhro","https://ap.wps.com/l/cbCaik4k9S23uhro","pdf",1509068,"English","# Effective Supervision and the Evolving Financial Services Industry\n## Supervision and Regulation Are Different\n## What Are Regulation and Supervision Supposed to Accomplish?","[{\"question\":\"What is the key difference between regulation and supervision?\",\"answer\":\"Regulation refers to the rules and procedures set to govern an industry’s behavior, while supervision is the monitoring and oversight function carried out after those rules have been passed.\"},{\"question\":\"Why does the author say the mission of regulation and supervision must change?\",\"answer\":\"Because changes in legislation, technology, mergers, and new financial products make the financial system dynamic, requiring modernization of the supervision and regulation framework to continue serving its public purpose.\"},{\"question\":\"What problems can arise when government assigns core financial functions?\",\"answer\":\"The author highlights subsidy distortion and moral hazard, explaining that responsibilities like lender-of-last-resort roles and deposit insurance can misalign incentives and make risk-taking too cheap.\"}]","Effective Supervision and the Evolving Financial Services Industry - Commentary | PDF",1789958527,13]