Monetary Policy and Banking Supervision Functions on the Central Bank
This paper analyzes the advantages and disadvantages of maintaining the banking supervisory functions at the Banco Central do Brasil (BCB). First, these pros and cons are identified and listed using the economic literature, after a brief analysis of the ongoing debate and international experience regarding monetary policy, independence of the central bank and banking supervision. Then it is discussed the international tendencies as related to central bank reforms and the respective supervisory systems, including an annex panel of the experience of 40 different countries. The first and clearest tendency identified is to withdraw supervisory functions from the monetary authorities, normally seen as capable of strengthening the "central bank independence". The second trend - and one that seems to be gaining strength - is merger of the agencies charged with banking, securities and insurance supervision into a single agency, enhancing their capacity to perform the financial groups' consolidated supervision. There is no firm conclusion as the more effective institutional arrangement related to banking supervision under the control of the central bank or another institution.
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