Central bankers as supervisors: Do crises matter?

Abstract

Global Financial Crisis many countries have changed their financial supervisory architecture by increasing the involvement of central banks in supervision. This has led many scholars to argue that financial crises are an important driver in explaining the evolution of the role of central banks as supervisors. We formally test this hypothesis employing a new database that captures the full set of supervisory reforms implemented during the period 1996-2013 in a large sample of countries. Our findings support the view that systemic banking crises are important drivers of reforms in supervisory structure. However, we also highlight an equally important peer effect, namely a tendency of countries to reform their financial supervisory architecture when others do so as well. We construct several measures of spatial spillover effects and show that they can explain institutional similarities among countries and impact the probability of reforming the role of the central bank in financial sector supervision.

Political voice on monetary policy: Evidence from the parliamentary hearings of the European Central Bank

“…The relationship between independence and accountability has thus become one of the key issues in the scholarship on central bank governance (Morris et al, 2004;de Haan et al, 2005;Berger et al, 2008;Crowe and Meade, 2008;Hasan and Mester, 2008;Waller, 2011;Khan, 2016;Romelli, 2018;Ireland, 2020), extending to the analysis of the supervisory responsibilities of central banks (Masciandaro and Quintyn, 2016;Masciandaro and Romelli, 2018). The argument about the benefits of independent central banks' accountability ties with the broad literature on non-majoritarian institutions, like independent regulatory agencies.…”

Introducing Principles and Standards for Responsible Investment

“…Whereas central banks that have adopted or planned to adopt environmental policies are the same in both samples, central banks that lag in this regard (i.e. those with a CBGSI equal to 0) are those found in Masciandaro and Romelli (2018). We decided to use their sample in order to have a larger number of central banks not engaging in green initiatives for the sake of ensuring more variability in the data.…”

Central Banks and Banking Regulation: Historical Legacies and Institutional Challenges

“…While many countries with separate regulatory agencies are in North and Central Europe, almost all Southern European countries adopted the central bank model. <FIGURE X.3 ABOUT HERE> Masciandaro and Romelli (2017) compiled a data set on central banking as regulatory authority that covers 105 countries and measured the level of unified financial regulation within the central bank. They found that large banking crises do trigger transformations in financial supervisory structures, moving financial supervision from the executive-or from separate agencies-to the central bank.…”

“…As for regulatory agencies, where these already existed, they were simply granted autonomy; where they were not in place, new agencies with fresh delegation of responsibilities were created, and were eventually entitled with independence. Diffusion effects may also be important in explaining why countries adopt one model over the other: Masciandaro and Romelli (2017) find that geographic proximity and trade linkages are relevant in determining institutional choice. Given the high concentration of institutional switches in Europe that we have uncovered, we can testify to the probable presence of diffusion effects in major institutional changes.…”