THE 1993 BANKING LAW - THE NEW CONFIGURATION OF SUPERVISORY CONTROLS

This paper describes the principles underlying the 1993 Banking Law, w ith particular reference to the role and instruments of supervision. T he basic lines of development of the system are identified as the defi nitive affirmation of the entrepreneurial nature of banking, the trans cending of regulatory-induced segmentation (soc-called despecializatio n) and the recognition of competition as the cardinal principle of mar ket discipline. In the new banking law, whose elements of continuity w ith respect to the 1936 Banking Law are noted, the discretionary natur e of supervisory activity is combined with an explicit statement of th e purposes of supervision and provisions to ensure transparency of its methods. The regulatory measures adopted by the credit authorities ar e characterized by generally applicable, objective rules and by their neutrality with respect to intermediaries' operating and organizationa l strategies. An important consequence of this approach is that the ri sk containment methods dictated by the authorities tend to coincide wi th those which intermediaries would adopt anyway. The conclusions unde rscore the need for intermediaries to uphold the values of professiona lism and business ethics, which are indispensable for solid fiduciary relations with customers and for sound and prudent management.