Week 4: college slides on supervising behavior/culture and stimulating change

Question 1

What is the difference between regulation and supervision?

Answer 1

regulation = rulemaking
supervision = monitoring and enforcement

difference is in timing and core activity

Question 2

What is supervision from a legal perspective? (4)

Answer 2

Supervision is seen as legal and economic manner

Law is known to all and steers human behavior
Organization is black box of human behavior but output is compliant with law
Focus on output of organization

Question 3

What is supervision from a psychological perspective?

Answer 3

Insight is within the black box (leadership, culture, structure)

Means including supervisors to look at themselves

Question 4

Is supervision from a legal OR a psychological perspective?

Answer 4

Neither, the psychological perspective forms an additional perspective (besides legal)

Question 5

What is responsive regulation theory?

Answer 5

Start at the bottom of the regulatory pyramid; cooperation has the biggest chance of getting a cooperative response

Question 6

What are the 5 levels of the regulatory pyramid (top to bottom)

Answer 6

1. Revoke licence
2. Impose penalty
3. Give warning
4. Collaborate
5. Convince, instruct or advice

Question 7

What is prudential supervision and who handles this?

Answer 7

Solidity financial institutions and a stable financial system (DNB)

Question 8

What is conduct supervision and who handles this?

Answer 8

Conduct and information provision of market participants (AFM)

Question 9

Why is the financial sector more heavily supervised than other sectors? (6)

Answer 9

(1) Complex product
(2) Intangible products
(3) Big impact
(4) Low buying frequency
(5) Long incubation time
(6) system effect and interdependency

Question 10

Why are financial products so difficult for consumers? (2)

Answer 10

They don’t know the differences between good and bad products

reputation and learning effects don’t work well because of low buying frequency

Question 11

What are the results of a study conducted by AFM among 18 organizations regarding ethical board leadership and unethical behavior? (3)

Answer 11

(1) Board commercial focus causes unethical behavior
(2) Less focus on customer interests’ causes unethical behavior
(3) More unjustified board pay causes more unethical behavior