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Central bank’s role and involvement in bank regulation: Lender of last resort arrangements and the Special Resolution Regime (SRR)

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  • Ojo, Marianne

Abstract

This paper considers developments which have necessitated greater involvement and a greater role for the central bank in financial regulation and supervision. The aftermath of the 2007/08 financial crisis has witnessed the enactment of legislation such as the Banking Act of 2009 which has not only introduced greater statutory powers for the central bank, but also the Special Resolution Regime. As well as a consideration of arguments which are in favour of the central bank’s role as supervisor and lender of last resort, the importance of central bank independence and safeguards which exist to ensure that sufficient accountability is fostered, will be considered. Safeguards and accountability mechanisms which are adequate, such that, whilst ensuring that the regulator is not susceptible to regulatory capture, do not impede the ability of such a regulator to obtain vital and necessary information from systemically important individual financial institutions. In its support of the view that central banks should assume a greater role in supervision, this paper not only seeks to justify why such a degree of involvement is vital to ensuring and maintaining stability in the financial system, but also those factors which are considered to be necessary if such a role is to be effective.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15771.

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Date of creation: Jun 2009
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Handle: RePEc:pra:mprapa:15771

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Keywords: central; bank; lender; last; resort; regulation; monetary; policy;

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  1. Buiter, Willem H., 2008. "Central banks and financial crises," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 495-633.
  2. Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group.
  3. Reinhart, Carmen & Felton, Andrew, 2008. "The First Global Financial Crisis of the 21st Century," MPRA Paper 11862, University Library of Munich, Germany.
  4. Michael Taylor & Marc Quintyn & Eva H. G. Hüpkes, 2005. "The Accountability of Financial Sector Supervisors," IMF Working Papers 05/51, International Monetary Fund.
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Cited by:
  1. Ojo, Marianne, 2009. "Basel II and the Capital Requirements Directive: Responding to the 2008/09 Financial Crisis," MPRA Paper 17379, University Library of Munich, Germany.

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