A Comparative Study of Legal Power of Supervisory Mechanisms in Banking System

The supervision of the operations and activities of banks are rendered by mechanisms specified by statute. In different countries, these mechanisms are categorized to three ones. The first one is supervision and leadership of a superior institution (typically central bank) in order to protect national currency and macro-economical polices of the country as a whole. Second, there is an internal regime of supervision in banks and financial institutions which is rendering by general assembly, board of directors and inspectors. This kind of supervision is securing the rights of bank as “legal person” and the rights of stockholders, too. The third one is supervision of stockholders in non-governmental banks which lead to controlling board of directors by inviting general assembly and asking its decisions on important issues of those banks. In this paper, we have discussed the legal mechanisms which are essential for supervision and control of banking activities. The “Rule of Law” in such mechanisms and instruments are leading to “accountability” and “transparency”. The results and reports of supervisory measures should be “supported” by legal sanctions. Consequently, the wrongdoers must be sentenced by criminal penalty, disciplinary punishment or civil responsibility according to the results of their faults and conducts.The legal power of supervisory mechanisms in banking system has been discussed by a comparative survey of the law of developed countries and instructions of international financial organizations.