Are central banks suited for the role of a regulator?

The current consensus for a regulatory blueprint after today’s financial crisis is calling for increased macro-prudential supervision of financial markets. The proposals of Europe’s de Larosière working group are no exception. What is another characteristic of the discussion is that both the Fed and the ECB are quick to proclaim that they should play a “leading” role in the macro-prudential supervision. I.e. they want to have that responsibility rather than just a mere say in the process (central role) as they are conceded in the de Larosière proposals. What makes this an interesting topic is the fact that central banks over the last decade had to part from a lot of supervisory responsibilities, so they are now lobbying to get these back.

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