Allocating Lending of Last Resort and Supervision in the Euro Area
The Maastricht Treaty created the European System of Central Banks and the European Central Bank to head this system. The Treaty entrusted the European Central Bank with the responsibility for monetary policy, but it did not give this institution supervisory powers or an explicit mandate for providing emergency liquidity support to individual banks. National authorities remained responsible for financial stability. As a result, in the euro area some bank regulatory functions are centralized, while others are allocated to not one, but multiple, competing national regulators. Previous researchers have discussed the potential implications of this institutional allocation of regulation on the financial stability of the region. In this chapter, we investigate instead the potential efficiency implications. We focus on the consequences of the allocation of the lender of last resort and supervisory functions for the degree of forbearance in closing distressed banks and for the level of diligence in bank supervision. We conclude that the integration of banking markets without the integration of regulatory functions increases forbearance and decreases supervision. Centralizing regulatory functions will tend to reverse this decline. If only one of the two functions is centralized, then it will be more effective to centralize the supervisory function.
Should Banking Supervision and Monetary Policy Tasks Be Given to Different Agencies
This paper adds some new arguments to the thesis that the responsibility for banking supervision should be assigned to an agency formally separated by the Central bank. We also provide some additional evidence on the macro and microeconomic performance of OECD countries whose banking systems are classified according to the regulatory regime in place. We find that the inflation rate is considerably higher and more volatile in countries where the Central bank acts as a monopolist in banking supervision. Besides, although banks seem to be more profitable when Central banks supervise them, they incur into higher costs and rely more on deposits with respect to more sophisticated liabilities as a funding source. The data are not definitively in favor of functional separation. However, we argue that the evolution of financial intermediaries, moral hazard problems and especially cost accountability seem to suggest that separation would be a better solution for industrialized countries. We also critically discuss the current arrangement of financial regulation and supervision in the EMU: our proposal is to establish an independent European System of Financial Supervisors (ESFS) structured similarly to the ESCB.
Subject index
Adoptive immunotherapy A1, A63, A63, A64, A64, A65, A66, A68, A69, A69, A70, A70, A71, A71, A72, A72, A73, A73, A74, A75, A76, A78, A79, A79, A7, A80, A80, A81, A81, A82, A84, A85, A86, A86, A88, A88, A89, A90, A90, A91, A92, A93, A93, A94, A95, A95, A96, A96, A97, A97, A98, A98, A99, A99, A102, A103, A104, A104, A166, A167, A169, A170, A174, A177, A179, A181, A182, A199, A204, A205, A21, A215, A220, A231, A231, A243, A251, A254, A25, A276, A287, A304, A307, A310, A315, A316, A316, A329, A331, A333, A357, A358, A369, A405, A441, A442, A458, A458, A459, A459, A461, A461, A463, A468, A468, A479, A492, A497, A497, A56, A58, A58, A59, A60, A60, A61, 1, 100, 101, 102, 103, 104, 106, 109, 111, 112, 113, 114, 115, 116, 117, 119, 120, 122, 123, 124, 125, 127, 128, 129, 13, 130, 131, 133, 134, 136, 139, 140, 141, 142, 146, 147, 148, 149, 150, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 163, 164, 165, 166, 167, 169, 173, 174, 175, 272, 273, 278, 280, 285, 290, 293, 297, 298, 324, 333, 335, 35, 353, 360, 379, 380, 400, 414, 418, 42, 454, 470, 493, 500, 504, 513, 515, 516, 542, 545, 549, 598, 599, 614, 675, 737, 739, 764, 765, 766, 767, 770, 771, 772, 780, 781, 801, 822, 830, 831, 89, 91, 92, 94, 95, 96, 98 Angiogenesis A108, A155, A171, A200, A201, A214, A228, A265, A305, A349, A350, A359, A410, A47, A48, A480, A483, A519, A5, 181, 257, 281, 327, 328, 351, 374, 435, 495, 583, 584, 602, 683, 76, 78, 802, 808, 873, 9 Antibody A7, A73, A81, A86, A91, A8, A99, A9, A104, A108, A108, A109, A109, A111, A115, A119, A126, A128, A130, A135, A138, A141, A144, A151, A153, A159, A160, A163, A164, A164, A171, A172, A175, A176, A2, A187, A193, A193, A195, A195, A198, A199, A20, A209, A212, A225, A229, A230, A23, A233, A233, A235, A239, A239, A240, A242, A244, A244, A245, A245, A246, A247, A247, A24, A250, A256, A260, A261, A266, A267, A268, A269, A273, A275, A286, A288, A292, A293, A296, A299, A300, A307, A3, A308, A31, A318, A324, A35, A334, A334, A336, A338, A339, A342, A343, A344, A344, A346, A346, A351, A351, A353, A356, A360, A361, A363, A368, A369, A370, A371, A372, A372, A373, A374, A376, A377, A378, A378, A379, A379, A380, A380, A388, A391, A399, A399, A41, A402, A410, A410, A411, A412, A414, A417, A418, A419, A419, A420, A422, A422, A423, A426, A427, A428, A428, A430, A431, A432, A434, A434, A435, A446, A454, A455, A459, A463, A465, A468, A468, A469, A474, A481, A483, A50, A486, A487, A491, A502, A502, A504, A507, A507, A508, A510, A511, A512, A512, A516, 12, 122, 133, 141, 151, 16, 167, 17, 174, 181, 182, 184, 185, 188, 195, 203, 210, 215, 218, 227, 231, 237, 243, 250, 253, 261, 262, 265, 267, 268, 281, 282, 287, 288, 3, 305, 313, 315, 317, 318, 323, 325, 34, 342, 348, 369, 377, 378, 38, 384, 385, 387, 393, 394, 395, 399, 401, 402, 403, 404, 405, 406, 407, 41, 412, 421, 428, 429, 438, 439, 442, 443, 450, 453, 469, 472, 476, 478, 480, 483, 486, 499, 5, 501, 51, 519, 531, 55, 550, 552, 557, 561, 562, 569, 571, 572, 573, 576, 578, 586, 587, 590, 594, 603, 605, 607, 612, 615, 616, 617, 618, 619, 621, 622, 626, 629, 630, 631, 632, 633, 634, 635, 647, 653, 665, 666, 67, 670, 683, 684, 686, 687, 690, 693, 696, 697, 698, 699, 702, 703, 704, 711, 713, 714, 715, 718, 721, 722, 725, 726, 727, 745, 757, 760, 766, 772, 776, 780, 781, 785, 793, 804, 808, 81, 812, 814, 820, 842, 843, 846, 851, 852, 853, 856, 858, 860, 861, 869 Antigen presenting cells A67, A79, A80, A92, A95, A96, A99, A99, A101, A102, A102, A108, A108, A111, A129, A139, A160, A166, A177, A178, A183, A191, A191, A213, A220, A221, A245, A254, A256, A262, A266, A275, A314, A322, A327, A328, A35, A335, A345, A359, A359, A360, A361, A364, A366, A368, A369, A371, A372, A403, A409, A411, A411, A418, A422, A433, A449, A48, A468, A471, A472, A4, A50, A495, A502, A506, A513, A514, A515, 108, 128, 130, 153, 157, 160, 166, 167, 168, 169, 170, 181, 182, 188, 217, 235, 263, 271, 290, 291, 299, 310, 311, 349, 360, 362, 404, 418, 421, 431, 438, 453, 510, 526, 538, 540, 55, 553, 575, 601, 602, 603, 605, 610, 611, 612, 615, 617, 618, 672, 682, 685, 686, 695, 703, 724, 748, 78, 780, 787, 790, 8, 81, 828, 842, 849, 862, 864, 868 Autoimmunity A8, A116, A15, A180, A181, A22, A380, A387, A394, A395, A402, A408, A502, A510, 16, 197, 27, 295, 296, 37, 637, 645, 657, 658, 671, 680, 843, 856