Financial Supervision Design and Central Bank Independence

This chapter analyses how the central bank’s role in the monetary institutional setting can affect the unification process of the financial supervision architecture. Using indicators of monetary commitment and central bank independence, we demonstrate that these legal proxies show an inverse link with the financial supervision unification, while at the same time the trade off between supervisory unification and the central bank involvement in supervision still holds. Therefore the monetary commitment and the independence do matter: in an institutional setting characterized by a central bank deeply and successfully involved in supervision, or legally independent, a multi-authority model seems to be likely to occur; this is the so called central bank fragmentation effect.