Central Banks, Regulatory Capture and Banking Supervision Reforms
37 Pages Posted: 10 Dec 2010
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: Suggested Citation
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