Central bank’s role and involvement in bank regulation: Lender of last resort arrangements and the Special Resolution Regime (SRR)
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.
|Date of creation:||Jun 2009|
|Date of revision:||Sep 2011|
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- Felton, Andrew & Reinhart, Carmen M. (ed.), 2009.
"The First Global Financial Crisis of the 21st Century Part II: June–December, 2008,"
Centre for Economic Policy Research, number p199, December.
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- Michael W Taylor & Marc G Quintyn & Eva H. G. Hüpkes, 2005. "The Accountability of Financial Sector Supervisors; Principles and Practice," IMF Working Papers 05/51, International Monetary Fund.
- Buiter, Willem H., 2008. "Central banks and financial crises," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 495-633.
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- . . & Willem Buiter, 2008. "Central banks and financial crises," FMG Discussion Papers dp619, Financial Markets Group.
- Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group. Full references (including those not matched with items on IDEAS)
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