To Concentrate or to Disperse? Choosing Among Governance Arrangements in Macroprudential Regulation

After the global financial crisis, it is now widely recognized that in addition to established microprudential policies, the stability of the financial sector requires the adoption of macroprudential policies. A number of countries have reviewed their institutional frameworks for financial stability in order to support the development of macroprudential policy. One of the key features of the new institutional set ups has been the delegation of macroprudential responsibilities to central banks. However, whereas some countries assigned almost unique responsibility to the central banks, others opted for a committee-type governance arrangement. What factors account for the choice between concentrated and dispersed governance arrangements? Based on the comparison of the MPR institutional design created in the UK, the EU, and the US, the paper shows that the choice of the institutional set up reflects previous institutional choices. However, the design of the macroprudential governance framework was less influenced by the pre-crisis allocation of supervisory responsibility than by the mandate of the central bank.