THE ROLE OF NBFIs IN DEVELOPING MARKET. LEGAL FRAMEWORK
THE ROLE OF NBFIs IN DEVELOPING MARKET. LEGAL FRAMEWORK

Summary/Abstract: The nonbank regulatory issues facing emerging markets are the same as those facing developed markets. Every country can benefit from a healthy sector of nonbank financial institutions (NBFIs) that provide a sound basis for economic growth. The regulatory structure for NBFIs is not only a critical factor in ensuring that these institutions perform their functions efficiently but also an important factor in stimulation or retarding their growth and development as part of the financial system. Excessive regulation can stifle their emergence. Equally unhelpful, a poor incentive structure can encourage growth for the wrong reasons and in the wrong forms, leading ultimately to problems, of not crises. The objective should be to provide a sound regulatory framework that enables NBFIs to flourish to the mutual benefit of all involved - neither forced to grow beyond the economy’s needs nor prevented from playing their natural role of increasing financial efficiency. This paper focuses on the importance of legal infrastructure, the role of financial sector professions, the role of incentives for the growth of NBFIs, the role of foreign competition, the importance of public sector governance.

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