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Financial Regulation and Supervision in the Euro Area: A Four-Peak Proposal

  • Giorgio Di Giorgio
  • Carmine Di Noia

In this paper, we discuss pros and cons of different models for financial market regulation and supervision and we present a proposal for the re-organisation of regulatory and supervisory agencies in the Euro Area. Our arguments are consistent with both new theories and effective behaviour of financial intermediaries in industrialized countries. Our proposed architecture for financial market regulation is based on the assignment of different objectives or "finalities" to different authorities, both at the domestic and the European level. According to this perspective, the three objectives of supervision - microeconomic stability, investor protection and proper behaviour, efficiency and competition - should be assigned to three distinct European authorities, each one at the centre of a European system of financial regulators and supervisors specialized in overseeing the entire financial market with respect to a single regulatory objective and regardless of the subjective nature of the intermediaries. Each system should be structured and organized similarly to the European System of Central Banks and work in connection with the central bank which would remain the institution responsible for price and macroeconomic stability. We suggest a plausible path to build our 4-peak regulatory architecture in the Euro area.

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Paper provided by Wharton School Center for Financial Institutions, University of Pennsylvania in its series Center for Financial Institutions Working Papers with number 01-02.

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Date of creation: Jan 2001
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Handle: RePEc:wop:pennin:01-02
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  1. Franklin Allen & Anthony M. Santomero, 1996. "The Theory of Financial Intermediation," Center for Financial Institutions Working Papers 96-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
  2. 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.
  3. Franco Bruni & Christian de Boissieu, 2000. "Lending of Last Resort and Systemic Stability in the Eurozone," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  4. Lawrence J. White, 1996. "International Regulation of Securities Markets: Competition or Harmonization?," NBER Chapters, in: The Industrial Organization and Regulation of the Securities Industry, pages 207-242 National Bureau of Economic Research, Inc.
  5. Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group.
  6. Franks, Julian R. & Schaefer, Stephen M. & Staunton, Michael D., 1997. "The direct and compliance costs of financial regulation," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1547-1572, December.
  7. Lawrence J. White, . "Technological Change, Financial Innovation, and Financial Regulation: The Challenges for Public Policy," Center for Financial Institutions Working Papers 97-33, Wharton School Center for Financial Institutions, University of Pennsylvania.
  8. Prati, A. & Schinasi, G.J., 1999. "Financial Stability in European Economic and Monetary Union," Princeton Studies in International Economics 86, International Economics Section, Departement of Economics Princeton University,.
  9. Charles Goodhart, 1999. "Myths About the Lender of Last Resort," FMG Special Papers sp120, Financial Markets Group.
  10. Taylor, Michael & Fleming, Alex, 1999. "Integrated financial supervision : lessons of Northern European experience," Policy Research Working Paper Series 2223, The World Bank.
  11. Richard J. Herring & Anthony M. Santomero, 2000. "What Is Optimal Financial Regulation?," Center for Financial Institutions Working Papers 00-34, Wharton School Center for Financial Institutions, University of Pennsylvania.
  12. Padoa-Schioppa, Tommaso, 1999. "EMU and Banking Supervision," International Finance, Wiley Blackwell, vol. 2(2), pages 295-308, July.
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