impera تقسیم شده : اثر قطعه قطعه شدن اتحاد نظارت مالی و بانک مرکزی

This paper analyses how the role of the central bank can influence the unification of the overall financial supervision architecture. We claim that the policymaker's choices can be viewed as a sequential process in which the institutional status quo matters. The degree of unification in supervision is decided based on the position of the central bank. If the central bank involvement in supervision and its reputation are high, the unification level is likely to be low, and vice versa. The central bank fragmentation effect can be explained through the three possible channels of moral hazard, bureaucracy, and reputation endowment effects. The empirical analysis–performed with ordered logit and probit functions on a dataset of 89 countries–confirms the robustness of the central bank fragmentation effect.

Financial supervision regimes vary significantly from country to country. A review of the supervision architectures1 indicates a trend toward a gradual concentration of powers. In Europe this trend has seemed rather strong in recent years. In addition to Norway, the first country to establish a single supervisor in 1986, and Iceland (1988), six other European Union member states–Austria (2002), Belgium (2004), Denmark (1988), Germany (2002), Sweden (1991) and the United Kingdom (1997)–have assigned the task of supervising the entire financial system to a single authority other than the central bank. In Ireland (2003), the supervisory responsibilities were concentrated in the hands of the central bank. Four countries involved in the 2004 EU enlargement process–Estonia (1999), Latvia (1998), Malta (2002) and Hungary (2000)–have also reformed their structures, concentrating all powers in a single authority,2 while, outside Europe, a unified agency has been established in Kazakhstan (2004), Korea (1997), Japan (2001), Nicaragua (1999) and, among the small countries, in Bahrain, Bermuda, Cayman Islands, Gibraltar, Maldives, Netherlands Antilles, Singapore and the United Arab Emirates. The single supervisor regime seems to be the “natural” and best answer to the challenges posed by financial market integration. If, in the long run, the expected financial structure is a perfectly integrated and single market, the best design for the supervisory architecture would seem to be the single authority. But the answer is apparently not that simple. The descriptive evidence3 seems to correct the idea that, given the blurring process in the financial landscape, there are two possible approaches to supervision: 1) unification under the roof of the central bank; and 2) unification in a different supervisory body.4 In reality, the unification of supervision seems evident only in the case of a single financial authority. In other words, the descriptive analysis signals an interesting result: the national choices on how many agencies are to be involved in supervision is strictly linked to the role of the central bank. The degree of supervision unification appears to be inversely related to central bank involvement. The trade-off is confirmed by exploring the determinants of recent reforms in supervisory regimes.5 How do we explain the fragmentation effect caused by the involvement of the central bank in supervision? The aim of this paper is to shed light on the economics of the central bank fragmentation effect. The paper is organized as follows. Section 2 describes the approach, which considers the supervisory structure as a path-dependent variable. The financial authorities concentration index (FAC Index) is used in Section 3 to identify this dependent variable. Then we recognize the importance of asking what role the central bank plays in the various national supervisory settings. The central bank as financial authority index (CBFA Index) is used to gauge the central bank's involvement in financial supervision. Using both the FAC Index and the CBFA Index, we confirm that the degree of supervision unification seems to be inversely proportional to the central bank's involvement in supervision (the central bank fragmentation effect). Section 4 discusses the central bank fragmentation effect. The approach adopted considers the supervisory framework with one or more authorities as a rule-driven path dependent variable determined by the policymaker. We claim that the political choice of supervision concentration level will depend on the role the central bank plays in the supervision. The policymaker's choice can be viewed as a sequential process in which the institutional status quo counts: the supervision concentration level is decided based on the position of the central bank. If the role of the central bank is limited, the supervision concentration level will be high and vice versa. The central bank fragmentation effect is explained through moral hazard, bureaucracy, and reputation endowment effects. If a low level of central bank involvement is the status quo, the policymaker is not likely to increase it, to avoid moral hazard phenomena in the controlled intermediaries (moral hazard effect) or an increase in the bureaucratic powers of the central bank (bureaucracy effect). An increased unification level may be achieved by creating a new single financial authority. If a high level of central bank involvement is the status quo, the policymaker may not wish to unify the supervision in the hands of the central bank for the same reasons (moral hazard and bureaucracy effects). At the same time, the policymaker may not be in a position to establish a new single financial authority, reducing the central bank's involvement in supervision if the central bank's reputation is high (reputation endowment effect). The overall effect is an inverse relationship between supervision unification and central bank involvement. In order to assess the central bank fragmentation effect, in Section 5 we estimate a model of the probability of different regime decisions as a function of this variable, checking for other structural economic and institutional variables. The empirical analysis, which is performed with ordered logit and probit functions on a dataset of 89 countries, confirms that the level of supervision unification is inversely dependent on central bank involvement in supervision. Section 6 presents conclusions.

The objective of this paper has been to analyse how the institutional position of the central bank influences the recent tendency to unify the powers of financial supervision, highlighting the robustness of the central bank fragmentation effect. The results seem particularly promising for future research. It will be important to make an in-depth analysis of the determinants of the central bank fragmentation effect. In this paper, the central bank fragmentation effect is an independent variable used in explaining the supervision unification level. The next step forward will be to consider the degree of central bank involvement as a dependent variable, in order to identify consistent proxies of the potential different causes (blurring hazard effect, bureaucracy effect, reputation endowment effect) that could explain the decision of policymakers to maintain or reform the supervisory responsibility of the monetary authority. It is no simple problem to identify completely and satisfactorily what the consistent proxies might be, because the preferences or beliefs of the policymaker regarding the pros and cons of reforming the central bank's involvement in supervision cannot be readily expressed with in concrete indicators. Examples are the political perceptions of the blurring hazard risks, the central bank reputation endowment and the bureaucratic power. The point is that generally this kind of variable is not available for a large cross-country sample.55 From the theoretical point of view, future effort will be to model the policymaker decision framework, in order to better highlight the features of the institutional and political process that leads a supervisory regime to assume given characteristics. Using the principal agent approach for addressing the architecture of financial supervision seems a very promising avenue.