Towards a New Architecture for Financial Stability: Seven Principles
This article uses insights from organizational economics and financial regulation to study the optimal architecture of supervision. It suggests that the new architecture should revolve around the following principles: (i) banking, securities and insurance supervision should be further integrated; (ii) the macro-prudential supervisory function must be in the hands of the central bank; (iii) the relation between macro- and micro-supervisors must be articulated through a management by exception system involving direct authority of the macro-supervisor over enforcement and allocation of tasks; (iv) given the difficulty of measuring output on supervisory tasks, the systemic risk supervisor must necessarily be more accountable and less independent than central banks are on their monetary task; (v) the supervisory agency cannot rely on high-powered incentives to motivate supervisors, and must rely 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 with a more centralized and hierarchical one. Oxford University Press 2010, all rights reserved, Oxford University Press.
Volume (Year): 13 (2010)
Issue (Month): 3 (September)
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: https://academic.oup.com/jiel
|Order Information:||Web: http://www.oup.co.uk/journals|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
- Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999. "Is Bank Supervision Central to Central Banking?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 629-653.
- Crémer, Jacques & Garicano, Luis & Prat, Andrea, 2003. "Codes in Organizations," IDEI Working Papers 172, Institut d'Économie Industrielle (IDEI), Toulouse, revised Feb 2005.
- Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-580, June.
- Skaperdas, Stergios, 1992.
"Cooperation, Conflict, and Power in the Absence of Property Rights,"
American Economic Review,
American Economic Association, vol. 82(4), pages 720-739, September.
- Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers 90-91-06a, California Irvine - School of Social Sciences.
- Paul H. Kupiec & Patricia A. White, 1996. "Regulatory competition and the efficiency of alternative derivative product margining systems," Finance and Economics Discussion Series 96-11, Board of Governors of the Federal Reserve System (U.S.).
- George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 921-955.
- Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2004.
"Bank regulation and supervision: what works best?,"
Journal of Financial Intermediation,
Elsevier, vol. 13(2), pages 205-248, April.
- Barth, James R. & Caprio Jr., Gerard & Levine, Ross, 2001. "Bank regulation and supervision : what works best?," Policy Research Working Paper Series 2725, The World Bank.
- James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc.
- Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-560, October.
- Lastra, Rosa Maria, 2006. "Legal Foundations of International Monetary Stability," OUP Catalogue, Oxford University Press, number 9780199269341.
- Sah, Raaj Kumar & Stiglitz, Joseph E, 1986.
"The Architecture of Economic Systems: Hierarchies and Polyarchies,"
American Economic Review,
American Economic Association, vol. 76(4), pages 716-727, September.
- Raaj Kumar Sah & Joseph E. Stiglitz, 1984. "The Architecture of Economic Systems: Hierarchies and Polyarchies," NBER Working Papers 1334, National Bureau of Economic Research, Inc.
- Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-991, September.
- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
- Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
- Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group.
- Di Noia, Carmine & Di Giorgio, Giorgio, 1999.
"Should Banking Supervision and Monetary Policy Tasks Be Given to Different Agencies?,"
Wiley Blackwell, vol. 2(3), pages 361-378, November.
- Carmine Di Noia & Giorgio Di Giorgio, 1999. "Should Banking Supervision and Monetary Policy Tasks Be Given to Different Agencies," Center for Financial Institutions Working Papers 00-11, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Carmine Di Noia & Giorgio Di Giorgio, 1999. "Should banking supervision and monetary policy tasks be given to different agencies?," Economics Working Papers 411, Department of Economics and Business, Universitat Pompeu Fabra.
- George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
- Roger Ferguson, 1999. "Alternative Approaches to Financial Supervision and Regulation," Journal of Financial Services Research, Springer;Western Finance Association, vol. 16(2), pages 297-303, December.
- Kane, Edward J, 1996. "De Jure Interstate Banking: Why Only Now?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 141-161, May.
- George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
- Ashcraft, Adam B. & Schuermann, Til, 2008.
"Understanding the Securitization of Subprime Mortgage Credit,"
Foundations and Trends(R) in Finance,
now publishers, vol. 2(3), pages 191-309, June.
- Adam B. Ashcraft & Til Schuermann, 2008. "Understanding the securitization of subprime mortgage credit," Staff Reports 318, Federal Reserve Bank of New York.
- Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
- Paul H. Kupiec & A. Patricia White, 1996. "Regulatory competition and the efficiency of alternative derivative product margining systems," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(8), pages 943-968, December.
- Joseph G. Haubrich, 1996. "Combining bank supervision and monetary policy," Economic Commentary, Federal Reserve Bank of Cleveland, issue Nov.
When requesting a correction, please mention this item's handle: RePEc:oup:jieclw:v:13:y:2010:i:3:p:597-621. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.