Central Banks, Regulatory Capture and Banking Supervision Reforms

37 Pages Posted: 10 Dec 2010

See all articles by Pierre Boyer

Pierre Boyer

Ecole Polytechnique, Palaiseau - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Jorge Ponce

Central Bank of Uruguay

Date Written: December 1, 2010

Abstract

Should central banks be in charge of micro-prudential as well as of macro-prudential supervision? This paper uses a formal model to analyze that question, and thereby informs the current reform efforts on the fields of banking supervision. Our main finding is that, while there are good reasons for central banks to conduct macroprudential supervision, it is socially optimal that another supervisor conducts micro-prudential supervision when supervisors' capture by bankers is a concern.

Keywords: Central banks, banking supervision reform, prudential supervision, regulatory capture, institutional organization

JEL Classification: D42, G24

Suggested Citation

Boyer, Pierre C. and Ponce, Jorge, Central Banks, Regulatory Capture and Banking Supervision Reforms (December 1, 2010). Paolo Baffi Centre Research Paper No. 2010-83, Available at SSRN: https://ssrn.com/abstract=1722529 or http://dx.doi.org/10.2139/ssrn.1722529

Pierre C. Boyer

Ecole Polytechnique, Palaiseau - Department of Economics ( email )

Route de Saclay
Palaiseau, 91120
France

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jorge Ponce (Contact Author)

Central Bank of Uruguay ( email )

Diagonal Fabini 777
Montevideo, CP 11100
Uruguay

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