The article describes the financial sector, which involves a number of policy functions aiming at ensuring adequate market functioning and the stability and integrity of the financial system as a whole. These functions include the monitoring of the solvency and conduct of business of different types of financial institutions. The design of institutional arrangements for the oversight of the financial sector requires these different functions to be assigned to specific agencies. Decisions need to be made on how best to group the functions, assuming that each of the agencies involved would normally be responsible for more than one function. Traditionally, this kind of decision-making has emphasized two different sets of criteria, when comparing the alternatives: (i) whether the various functions conflict with or complement each other; and (ii) political economy considerations related to the distribution of power between agencies, and between agencies and the government.