Central Banking, Financial Regulation and Supervision
This course offers an updated and systematic discussion of the relationship between central banks, financial regulation and supervision after the global financial crisis. The crisis has raised new questions about the compatibility of monetary and financial stability, which are changing the face of central banking and its relationships with the architecture of financial regulation and supervision. It explores on both the economics and political economy of the topic, in order to understand how and why reforms of the role of the central banks can be designed and implemented. The general suggestion is that future effectiveness of the central banking architecture will depend on its ability to ensure the consistency between the monetary actions in normal and extraordinary times. Consequently the possible paths in the central bank strategies and tactics, as well as in the classic concepts of independence, accountability and transparency, are analyzed and discussed.
This course describes how behavioral elements are relevant to financial supervision, regulation, and central banking. It focuses on
- (1) behavioral effects of norms (social, legal, and market);
- (2) behavior of others (internalization, identification, and compliance); and
- (3) psychological biases. It stresses that financial supervisors, regulators, and central banks have not yet realized the full potential that these behavioral elements hold. To do so, they need to devise a behavioral approach that includes aspects relating to individual and group behavior.
- The course provides case examples of experiments with such an approach, including behavioral supervision.
- reviews the factors that make a financial system fragile and discusses the interaction between financial fragility and monetary policy