Financial Sector Oversight

Definition ∞ Financial sector oversight involves the monitoring and regulation of financial institutions and markets by governmental authorities. This function aims to maintain the stability and integrity of the financial system, protect consumers and investors, and prevent illicit financial activities. It includes setting prudential standards, conducting examinations, and enforcing compliance with relevant laws and regulations. Oversight bodies work to mitigate systemic risks and ensure fair and transparent market operations.
Context ∞ The expansion of digital assets introduces new challenges for traditional financial sector oversight, requiring regulators to adapt existing frameworks or develop specialized approaches. Discussions focus on extending supervisory reach to crypto-asset service providers, addressing novel risks like cyber security vulnerabilities and market manipulation in decentralized settings. Harmonizing international oversight approaches is a significant ongoing effort to prevent regulatory arbitrage.