Is Bank Supervision Central to Central Banking?

Posted: 6 Sep 1999

See all articles by Joe Peek

Joe Peek

Federal Reserve Banks - Federal Reserve Bank of Boston

Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation

Geoffrey M. B. Tootell

Federal Reserve Banks - Federal Reserve Bank of Boston

Abstract

Whether central banks should play an active role in bank supervision and regulation is being debated both in the United States and abroad. While the Bank of England has recently been stripped of its supervisory responsibilities and several proposals in the United States have advocated removing bank supervision from the Federal Reserve System, other countries are considering enhancing central bank involvement in this area. Many of the arguments for and against these proposals hinge on the effect this change would have on the ability of the central bank to conduct monetary policy. We find that confidential supervisory information on bank ratings significantly improves forecast accuracy of variables critical to the conduct of monetary policy, which supports the argument that central banks should have bank supervision responsibility.

JEL Classification: E52, E58

Suggested Citation

Peek, Joe and Rosengren, Eric S. and Tootell, Geoffrey M.B., Is Bank Supervision Central to Central Banking?. Quarterly Journal of Economics, Vol. 114, No. 2, May 1999. Available at SSRN: https://ssrn.com/abstract=173169

Joe Peek (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation ( email )

600 Atlantic Avenue
P.O. Box 2076
Boston, MA 02210
United States
617-973-3090 (Phone)
617-973-3219 (Fax)

Geoffrey M.B. Tootell

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
(617) 973-3430 (Phone)

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