Bank of Russia and bank supervision: Together forever?

Abstract

The paper discusses the feasibility of institutional changes in the Russian banking regulation (supervision). The historical and modern practice of the organization of regulatory activity in financial markets is described. Traditional theoretical arguments in favor of and against combining the functions of monetary policy and banking supervision within the Bank of Russia are considered and analyzed under current conditions. The impact of the global financial crisis is taken into account in terms of the need to institutionalize macroprudential policies and to coordinate them with microprudential policies. Based on this analysis the conclusion is made about the absence of fundamental preconditions for preserving the status quo in relation to banking supervision by the Bank of Russia in the context of considerable costs of correcting its errors. There commendation to phase out seniorage financing of banking supervision is given.

Inflation targeting: From “constrained discretion” to singularity

“…Indeed, none of the distributed institutional arrangements between independent monetary and financial regulators described by (Agénor & Flamini, 2016) dismisses all possible contradictions. Even after the lessons of the global financial crisis have been learned, it remains to be seen whether the trade-off between these goals can be successfully internalized within the central bank, which nowadays most often assumes the macroprudential function single-handedly (Buklemishev & Vatolin, 2019). 12…”