Prudential Regulation and Supervision for Agricultural Finance

This paper examines what adjustments need to be made in order to facilitate the provision of financial services with a conducive prudential regulatory environment. The author analyses:

• Requirements to external vs. internal regulation in financial institutions;
• Relevance of self-regulatory and -supervisory approaches;
• Influence exerted by available funding sources (including donor money).

The key findings indicate that governments' role through prudential regulation and supervision is to provide a fair and competitive marketplace framework. This means that specifications and adjustments of regulatory and supervisory requirements should not go further than ensuring that different client groups in different sectors are only treated differently once they have a different risk and cost profile for financial service provision. The study suggests a number of detail adjustments to achieve this objective.

[Author's abstract]