A situation that arises when regulatory policies and action often favor the industry being regulated at the expense of the public (i.e., a regulator is captured by the industry it regulates). This negatively impacts the independence of the agency (central bank, regulator, ..) and its overall mandate as guardian of public interest in a given country or jurisdiction. Regulatory capture means that due to industry pressure, agencies tend to buck to the wishes of interest groups (private interests), and that the central bank or regulatory body does not perform its role in establishing an efficient operation of the market.

In a nutshell, this occurs when an agency tends to be biased towards its regulatory clients rather than the general public, leading to the so-called risk of regulatory capture. This is usually reflected in the major influence on the design of regulations, and regulatory processes and relationship with the industry.

Regulatory capture is also known as agency capture.