Analysis of the Integration of Financial Regulation and Supervision to the Central Bank

Abstract

We analyze the expected consequences of integrating financial regulation and supervision to the central bank. The unified financial services regulator, which spread in the last fifteen years as an alternative to specialized institutional regulation, may or may not be at the central bank. His presence there has as main advantages the ability to achieve economies of scale and scope, the improvement of the flows of information and the provision of a prudential bias to regulation, as the central bank is the institution that must solve a potential banking crisis. During the recent international financial crisis, also became clear that the micro-prudential regulatory approach proved inadequate in the context of macro-prudential problems, because it does not take into account the external effects that systemic institutions in trouble can cause. A more balanced approach between the macro and micro-prudential regulation can help to prevent or mitigate the externalities that an institution can generate to the system as a whole. Thus we also analyze aspects related to institutions and instruments of macro-prudential regulation.

JEL classification: E32 ; G21 ; G28