Ojo, Marianne (2010): Redefining a role for central banks: The increased importance of central banks’ roles in the management of liquidity risks and macro prudential supervision in the aftermath of the Financial Crisis.
Download (140kB) | Preview
Over the recent years, it has increasingly been acknowledged that macro prudential policies are not only considered to be “a missing ingredient from the current policy framework”, but that there has also been “too huge a gap between macro economic policy and the regulation of individual financial institutions.”
The link between monetary policy and macro prudential policies, the knowledge of central banks in matters relating to information on market conditions and their oversight of payment systems, as well as the need to bridge the existing gap between supervisory authorities and central banks whilst executing their supervisory roles and functions, have necessitated an extension of central banks role in the management of liquidity risks and macro prudential supervision.
A fundamental aim of this paper is to address how an extension of central banks’ roles in macro prudential supervision can assist regulators and supervisors in bridging the afore mentioned gap between macro economic policy and the regulation of individual financial institutions. In so doing, the need for greater focus on macro prudential factors, namely, the system as a whole, as opposed to mere focus on the supervision of individual institutions will be highlighted. The expertise and knowledge with which a central bank is endowed in its role as overseer of the entire payments system – as well as the quality of information which it has access to, are some of those factors which add weight to its ability to bridge “the gap”.
|Item Type:||MPRA Paper|
|Original Title:||Redefining a role for central banks: The increased importance of central banks’ roles in the management of liquidity risks and macro prudential supervision in the aftermath of the Financial Crisis|
|Keywords:||macroprudential; Financial Crisis; central banks; Basel III; systemic risk; supervision; liquidity; information; Banking Reform Act; Financial Services Act; regulators|
|Subjects:||E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy
K - Law and Economics > K2 - Regulation and Business Law
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles
G - Financial Economics > G0 - General > G01 - Financial Crises
|Depositing User:||Dr Marianne Ojo|
|Date Deposited:||15. Oct 2010 17:21|
|Last Modified:||06. May 2015 12:51|
Bank of England, Executive Summary “Role of Macro Prudential Policy” Discussion Paper November 2009 http://www.bankofengland.co.uk/publications/other/financialstability/roleofmacroprudentialpolicy091121.pdf
Basel Committee on Banking Supervision, “Principles for Sound Liquidity Risk Management and Supervision” < http://www.bis.org/publ/bcbs144.pdf>
Brunnermeier M et al, “The Fundamental Principles of Financial Regulation” Geneva Reports on the World Economy, 11< http://www.princeton.edu/~markus/research/papers/Geneva11.pdf>
Caprio G Jr, “Safe and Sound Banking: A Role for Counter cyclical Regulatory Requirements” World Bank Policy Research Working Paper 5198, The World Bank Development Research Group, Finance and Private Sector Development Team, February 2010
Cecchetti S, „Financial Reform: A Progress Report“ Remarks prepared for the Westminster Economic Forum, National Institute of Economic and Social Research, October 2010 at page 4 of 6 http://www.bis.org/speeches/sp101004.htm
Davis EP and Karim D, “Macro Prudential Regulation – The Missing Policy Pillar” Keynote Address at the 6th Euro frame Conference on Economic Policy Issues in the European Union, 12th June 2009, entitled „Causes and Consequences of the Current Financial Crisis, What lessons for EU Countries?“ http://www.ephilipdavis.com/macroprudential_regulation.pdf
Fisher P, „Managing Liquidity in the System – the Bank’s Liquidity Insurance Operations“ at page 2 <http://www.bis.org/review/r101004e.pdf>
Financial Services Authority, A regulatory response to the global banking crisis (18th March 2009), FSA Discussion Paper (DP09/2) http://www.fsa.gov.uk/pubs/discussion/dp09_02.pdf.
Hannoun H, “The Expanding Role of Central Banks Since the Crisis: What are the Limits?” June 2010 Bank for International Settlements Publications http://www.bis.org/speeches/sp100622.pdf?noframes=1
HM Treasury White Paper, “Reforming Financial Markets” (8th July 2009), http://www.hmtreasury.gov.uk/d/reforming_financial_markets080709.pdf.
HM Treasury, „Financial Services Act“ http://www.hm-treasury.gov.uk/fin_bill_index.htm
Jordan TJ, „A Changing Role for Central Banks ?“ Speech by Mr Thomas J Jordan, Vice Chairman of the Governing Board of the Swiss National Bank, at the Welcome Event Master of Banking and Finance, St. Gallen, 22 September 2010, http://www.bis.org/review/r100924b.pdf
Ojo M, The Need for Government and Central Bank Intervention in Financial Regulation: Free Banking and the Challenges of Information Uncertainty http://mpra.ub.uni-muenchen.de/23298/
Rodriguez-Miguez J and Ojo M, “Juridical and Financial Considerations on the Public Re Capitalisation and Rescue of Financial Institutions During Periods of Financial Crisis” http://mpra.ub.uni-muenchen.de/24047/
Schäfer D and Zimmerman KF , “Bad Bank (s) and Re capitalization of the Banking Sector” (2009) Discussion Paper 897 of DIW Berlin <http://www.voxeu.org/index.php?q=node/3656>
Shearman and Sterling LLP, “UK Government Proposals for Financial Regulatory Reform” June 2010
Treasury Select Committee, “Banking Crisis: Regulation and Supervision_ Macro prudential Supervision” http://www.publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/767/76707.htm
Turner Review: A regulatory response to the global banking crisis (18th March 2009), http://www.fsa.gov.uk/pubs/other/turner_review.pdf.