Allocating Financial Regulatory Powers: The Twin Views

What approaches can be used to analyze the regulatory and supervisory allocation of responsibility? The question can be explored both from the economic efficiency point of view and from the positive point of view of what lawmakers or policymakers would choose. In other word we can ask what is the socially optimal allocation of task, that is the allocation that would be chosen by a social planner (economic approach). Usually the normative benchmark is the Benthamite utilitarian optimum, i.e. the policy maximizing the sum of individual utilities. But we can also discuss the positive issue of whether and how the public representatives choose the supervisory architecture (political economic approach). We seek positive and normative explanations for the structure of financial supervision institutions. To understand the features and the evolution of these institutions, economic analysis should be integrated with a political economy approach. Both approaches are potentially useful and complementary for the analysis (the twin views). In this paper we discuss the two approaches respect to the key crucial issue in the overall financial supervision design: the definition of the optimal degree of financial supervision unification.