Definition ∞ Banking supervision refers to the oversight and regulation of financial institutions by governmental or quasi-governmental bodies. This process involves monitoring banks’ financial health, risk management practices, and adherence to legal and regulatory frameworks. The objective is to maintain the stability and integrity of the financial system, protect depositors, and prevent systemic crises. Effective supervision is crucial for ensuring confidence in the banking sector.
Context ∞ Current discussions surrounding banking supervision are increasingly focused on its application to digital asset markets and the entities operating within them. Regulators globally are grappling with how to adapt existing supervisory frameworks to the unique characteristics of cryptocurrencies and decentralized finance platforms. Key debates involve defining the scope of supervision, establishing clear lines of responsibility, and mitigating novel risks such as cyber threats and illicit finance. Future developments will likely involve the implementation of new regulatory technologies and international cooperation to address the borderless nature of digital finance.
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