13 January 2011

The role of central banks in financial supervision

The Central Bank of Iceland has published a report on the role of central banks in financial supervision. The report was prepared in response to the global and domestic financial crisis, as the Parliament of Iceland has declared its intention to review legislation on financial supervision and central bank activities.

The report focuses on the financial system, the role of financial supervision and central banks, various methods and structures for financial supervision around the world, and current ideas pertaining to improved financial supervision.

One of the main conclusions presented is that, in view of the experience gained from financial supervision in recent years, macroprudential considerations must be given priority when designing a new financial supervisory framework. The report mentions the main macroprudential tools currently under consideration, including variable capital adequacy ratios, liquidity requirements, and variable ceilings for hypothecation of assets.

The report is intended as an informative contribution from the Central Bank of Iceland to the discussion currently underway concerning improvements in the regulatory framework and supervision of financial activities in Iceland; however, it does not include an explicit proposal on this topic.

The report, Central Bank of Iceland Special Publication no. 5: The Role of Central Banks in Financial Supervision, can be found (in Icelandic: Sérrit Seðlabanka Íslands nr. 5: Hlutverk seðlabanka í fjármálaeftirliti) on the Central Bank website: www.sedlabanki.is.

Further information can be obtained from Már Guðmundsson, Governor of the Central Bank, and Þorsteinn Þorgeirsson, Senior Advisor to the Governor, at tel: +354 569 9600.

See the report (in Icelandic) here: Special Publication no. 5

Nr. 4/2011
13 January 2011