Towards a new architecture for financial stability: seven principles

Garicano, Luis ORCID: 0009-0002-9738-0945 and Lastra, Rosa (2010) Towards a new architecture for financial stability: seven principles. CEP Discussion Papers (CEPDP0990). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

Preview

PDF Download (626kB) | Preview

• Author

Abstract

In this paper we use insights from organizational economics and financial regulation to studythe optimal architecture of supervision. We suggest that the new architecture should revolvearound the following principles: (i) banking, securities and insurance supervision should befurther integrated; (ii) macro prudential supervisory function must be in the hands of thecentral bank; (iii) the relation between macro and micro supervisors must be articulatedthrough a management by exception system involving direct authority of the macrosupervisor over enforcement and allocation of tasks; (iv) given the difficulty of measuringoutput on supervisory tasks, the systemic risk supervisor must necessarily be moreaccountable and less independent than Central Banks are on their monetary task; (v) thesupervisory agency cannot rely on high powered incentives to motivate supervisors, and mustrely on culture instead; (vi) the supervisor must limit its reliance on self regulation; and (vii)the international system should substitute the current loose, networked structure for a morecentralized and hierarchical one.

Item Type:	Monograph (Report)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2010 The Authors
Divisions:	Economics Management Centre for Economic Performance
Subjects:	H Social Sciences > HG Finance
JEL classification:	E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Date Deposited:	28 Feb 2013 12:31
Last Modified:	30 Oct 2025 03:42
URI:	http://eprints.lse.ac.uk/id/eprint/48900

Actions (login required)

View Item