[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/20844.html
   My bibliography  Save this paper

The Evolution of the Financial Stability Mandate: From Its Origins to the Present Day

Author

Listed:
  • Gianni Toniolo
  • Eugene N. White
Abstract
We investigate the origins and growth of the Financial Stability Mandate (FSM) to examine why bank supervisors, inside and outside of central banks succeeded or failed to meet their FSM. Three issues inform this study: (1) what drives changes in the FSM, (2) whether supervision should be conducted within the central bank or in independent agencies and (3) whether supervision should be rules- or discretion/principles-based. As histories of bank supervision are few, we focus on the history of six countries where there is sufficient information, three in Europe (England, France, and Italy) and three in the New World (U.S., Canada, and Colombia) to highlight the essential developments in the FSM. While there was a common evolutionary path, the development of FSM in each individual country was determined by how quickly each adapted to changes in the technology of the means of payment and their political economy, including their disposition towards competitive markets and openness to the world economy.

Suggested Citation

  • Gianni Toniolo & Eugene N. White, 2015. "The Evolution of the Financial Stability Mandate: From Its Origins to the Present Day," NBER Working Papers 20844, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20844
    Note: DAE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w20844.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ioannidou, Vasso P., 2005. "Does monetary policy affect the central bank's role in bank supervision?," Journal of Financial Intermediation, Elsevier, vol. 14(1), pages 58-85, January.
    2. Eric Monnet, 2014. "Monetary Policy without Interest Rates: Evidence from France's Golden Age (1948 to 1973) Using a Narrative Approach," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 137-169, October.
    3. Bordo, Michael D. & Goldin, Claudia & White, Eugene N. (ed.), 2007. "The Defining Moment," National Bureau of Economic Research Books, University of Chicago Press, number 9780226066912, August.
    4. Toniolo, Gianni (ed.), 2013. "The Oxford Handbook of the Italian Economy Since Unification," OUP Catalogue, Oxford University Press, number 9780199936694.
    5. Grossman, Richard S, 2001. "Double Liability and Bank Risk Taking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 143-159, May.
    6. Bordo, Michael D. & Redish, Angela, 1987. "Why Did the Bank of Canada Emerge in 1935?," The Journal of Economic History, Cambridge University Press, vol. 47(2), pages 405-417, June.
    7. Broadberry,Stephen & Harrison,Mark (ed.), 2005. "The Economics of World War I," Cambridge Books, Cambridge University Press, number 9780521852128, January.
    8. Claudia Goldin & Gary D. Libecap, 1994. "Introduction to "The Regulated Economy: A Historical Approach to Political Economy"," NBER Chapters, in: The Regulated Economy: A Historical Approach to Political Economy, pages 1-12, National Bureau of Economic Research, Inc.
    9. repec:ces:ifodic:v:12:y:2014:i:1:p:19108863 is not listed on IDEAS
    10. Anna J. Schwartz, 1987. "The Beginning of Competitive Banking in Philadelphia, 1782–1809," NBER Chapters, in: Money in Historical Perspective, pages 3-23, National Bureau of Economic Research, Inc.
    11. Charles W. Calomiris & Eugene N. White, 1994. "The Origins of Federal Deposit Insurance," NBER Chapters, in: The Regulated Economy: A Historical Approach to Political Economy, pages 145-188, National Bureau of Economic Research, Inc.
    12. Battilossi, Stefano, 2000. "Financial innovation and the golden ages of international banking: 1890 81," Financial History Review, Cambridge University Press, vol. 7(02), pages 141-175, October.
    13. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
    14. Michael D. Bordeo and Anna J. Schwartz, 1995. "The Performance and Stability of Banking Systems under "Self-Regulation": Theory and Evidence," Cato Journal, Cato Journal, Cato Institute, vol. 14(3), pages 453-479, Winter.
    15. Ricardo Reis, 2013. "Central Bank Design," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 17-44, Fall.
    16. Richard S. Grossman, 2010. "Unsettled Account: The Evolution of Banking in the Industrialized World since 1800," Economics Books, Princeton University Press, edition 1, number 9219.
    17. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, vol. 73(5), pages 1080-1091, December.
    18. Schenk, Catherine R., 1998. "The Origins of the Eurodollar Market in London: 1955-1963," Explorations in Economic History, Elsevier, vol. 35(2), pages 221-238, April.
    19. Goldin, Claudia & Libecap, Gary D. (ed.), 1994. "The Regulated Economy," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226301105, August.
    20. Monnet,Eric, 2019. "Controlling Credit," Cambridge Books, Cambridge University Press, number 9781108400084, January.
    21. Vincent Bignon & Marc Flandreau & Stefano Ugolini, 2012. "Bagehot for beginners: the making of lender‐of‐last‐resort operations in the mid‐nineteenth century," Economic History Review, Economic History Society, vol. 65(2), pages 580-608, May.
    22. Peter B. Kenen, 1994. "Managing the World Economy: Fifty Years After Bretton Woods," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 48, April.
    23. Kris James Mitchener & Matthew Jaremski, 2014. "The Evolution of Bank Supervision: Evidence from U.S. States," NBER Working Papers 20603, National Bureau of Economic Research, Inc.
    24. Wood,John H., 2009. "A History of Central Banking in Great Britain and the United States," Cambridge Books, Cambridge University Press, number 9780521741316, January.
    25. Alan S. Blinder, 2010. "How Central Should the Central Bank Be?," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 123-133, March.
    26. Calomiris, Charles W., 1990. "Is Deposit Insurance Necessary? A Historical Perspective," The Journal of Economic History, Cambridge University Press, vol. 50(2), pages 283-295, June.
    27. Anna J. Schwartz, 1987. "Real and Pseudo-Financial Crises," NBER Chapters, in: Money in Historical Perspective, pages 271-288, National Bureau of Economic Research, Inc.
    28. Bordo,Michael D. & Roberds,William (ed.), 2013. "The Origins, History, and Future of the Federal Reserve," Cambridge Books, Cambridge University Press, number 9781107013728, January.
    29. Martin Feldstein, 2010. "What Powers for the Federal Reserve?," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 134-145, March.
    30. Kryzanowski, Lawrence & Roberts, Gordon S, 1999. "Perspectives on Canadian Bank Insolvency during the 1930s: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 130-136, February.
    31. R. Glenn Hubbard, 1991. "Financial Markets and Financial Crises," NBER Books, National Bureau of Economic Research, Inc, number glen91-1.
    32. Frederic S. Mishkin & Eugene N. White, 2014. "Unprecedented Actions: The Federal Reserve’s Response to the Global Financial Crisis in Historical Perspective," NBER Working Papers 20737, National Bureau of Economic Research, Inc.
    33. Grossman, Richard S., 2007. "Fear and greed: The evolution of double liability in American banking, 1865-1930," Explorations in Economic History, Elsevier, vol. 44(1), pages 59-80, January.
    34. Capie,Forrest, 2010. "The Bank of England," Cambridge Books, Cambridge University Press, number 9780521192828, January.
    35. Occhino, Filippo & Oosterlinck, Kim & White, Eugene N., 2008. "How Much Can a Victor Force the Vanquished to Pay? France under the Nazi Boot," The Journal of Economic History, Cambridge University Press, vol. 68(1), pages 1-45, March.
    36. Rockoff, Hugh T., 1975. "Varieties of Banking and Regional Economic Development in the United States, 1840–1860," The Journal of Economic History, Cambridge University Press, vol. 35(1), pages 160-181, March.
    37. Alfredo Gigliobianco (editor) & Gianni Toniolo (editor), 2009. "Financial market regulation in the wake of financial crises: the historical experience," Workshop and Conferences 1, Bank of Italy, Economic Research and International Relations Area.
    38. Ben S. Bernanke, 2013. "A Century of US Central Banking: Goals, Frameworks, Accountability," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 3-16, Fall.
    39. Édouard Fernandez-Bollo, 2013. "Structural reform and supervision of the banking sector in France," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2013(1), pages 31-38.
    40. Bertrand BLANCHETON, 2014. "Les improvisations financière de la guerre de 1914-1918 en France. Les enjeux de la liquidité," Cahiers du GREThA (2007-2019) 2014-03, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    41. Martin Berghausen, 2014. "Public Debt in the Eurozone," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(01), pages 55-57, April.
    42. Vincent Bignon & Marc Flandreau & Stefano Ugolini, 2009. "Bagehot for beginners: The making of lending of last resort operations in the mid-19th century," Working Paper 2009/22, Norges Bank.
    43. Alan S. Blinder, 2010. "How Central Should the Central Bank Be?," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 123-133, March.
    44. Filippo Cesarano & Giulio Cifarelli & Gianni Toniolo, 2012. "Exchange Rate Regimes and Reserve Policy: The Italian Lira, 1883–1911," Open Economies Review, Springer, vol. 23(2), pages 253-275, April.
    45. Carr, Jack & Mathewson, Frank & Quigley, Neil, 1995. "Stability in the Absence of Deposit Insurance: The Canadian Banking System, 1890-1966," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1137-1158, November.
    46. Schwartz, Anna J., 2009. "Money in Historical Perspective," National Bureau of Economic Research Books, University of Chicago Press, number 9780226742298, August.
    47. Martin Berghausen, 2014. "Public Debt in the Eurozone," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(1), pages 55-57, 04.
    48. Michael D. Bordo & David C. Wheelock, 1998. "Price stability and financial stability: the historical record," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 41-62.
    49. Fenstermaker, J Van & Filer, John E, 1986. "Impact of the First and Second Banks of the United States and the Suffolk System on New England Bank Money: 1791-1837," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 28-40, February.
    50. Mitchener, Kris James, 2014. "The Evolution of Bank Supervision: Evidence from U.S. States," CAGE Online Working Paper Series 181, Competitive Advantage in the Global Economy (CAGE).
    51. Goodhart, C. A. E., 2011. "The changing role of central banks," Financial History Review, Cambridge University Press, vol. 18(2), pages 135-154, August.
    52. Claudio E. V. Borio & Gianni Toniolo, 2006. "One hundred and thirty years of central bank cooperation: a BIS perspective," BIS Working Papers 197, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eric Monnet & Miklos Vari, 2023. "A Dilemma between Liquidity Regulation and Monetary Policy: Some History and Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 915-944, June.
    2. De Bonis, Riccardo & Marinelli, Giuseppe & Vercelli, Francesco, 2018. "Playing yo-yo with bank competition: New evidence from 1890 to 2014," Explorations in Economic History, Elsevier, vol. 67(C), pages 134-151.
    3. Monnet, Eric & Velde, François R., 2020. "Money, Banking, and Old-School Historical Economics," CEPR Discussion Papers 15348, C.E.P.R. Discussion Papers.
    4. Marco Molteni & Dario Pellegrino, 2021. "Lessons from the Early Establishment of Banking Supervision in Italy (1926-1936)," Quaderni di storia economica (Economic History Working Papers) 48, Bank of Italy, Economic Research and International Relations Area.
    5. Alin Marius Andries & Anca Maria Podpiera & Nicu Sprincean, 2022. "Central Bank Independence and Systemic Risk," International Journal of Central Banking, International Journal of Central Banking, vol. 18(1), pages 81-130, March.
    6. Eric Monnet & Miklos Vari, 2019. "Liquidity Ratios as Monetary Policy Tools: Some Historical Lessons for Macroprudential Policy," IMF Working Papers 2019/176, International Monetary Fund.
    7. repec:zbw:bofitp:2020_013 is not listed on IDEAS
    8. Levieuge, G. & Lucotte, Y. & Pradines-Jobet, F., 2019. "Central banks’ preferences and banking sector vulnerability," Journal of Financial Stability, Elsevier, vol. 40(C), pages 110-131.
    9. Billio, Monica & Caporin, Massimiliano & Frattarolo, Lorenzo & Pelizzon, Loriana, 2023. "Networks in risk spillovers: A multivariate GARCH perspective," Econometrics and Statistics, Elsevier, vol. 28(C), pages 1-29.
    10. Michael D. Bordo, 2017. "An Historical Perspective on the Quest for Financial Stability and the Monetary Policy Regime," Economics Working Papers 17108, Hoover Institution, Stanford University.
    11. Alin Marius Andries & Anca Maria Podpiera & Nicu Sprincean, 2022. "Central Bank Independence and Systemic Risk," International Journal of Central Banking, International Journal of Central Banking, vol. 18(1), pages 81-130, March.
    12. Bignon, Vincent & Avaro, Maylis, 2019. "At Your Service! Liquidity Provision and Risk Management in 19th Century France," CEPR Discussion Papers 13556, C.E.P.R. Discussion Papers.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eugene N. White, 2011. ""To Establish a More Effective Supervision of Banking": How the Birth of the Fed Altered Bank Supervision," NBER Working Papers 16825, National Bureau of Economic Research, Inc.
    2. Calomiris, Charles W. & Flandreau, Marc & Laeven, Luc, 2016. "Political foundations of the lender of last resort: A global historical narrative," Journal of Financial Intermediation, Elsevier, vol. 28(C), pages 48-65.
    3. Frederic S. Mishkin & Eugene White, 2014. "Unprecedented actions: the Federal Reserve’s response to the global financial crisis in historical perspective," Globalization Institute Working Papers 209, Federal Reserve Bank of Dallas.
    4. Michael D. Bordo, 2017. "An Historical Perspective on the Quest for Financial Stability and the Monetary Policy Regime," NBER Working Papers 24154, National Bureau of Economic Research, Inc.
    5. Charles W. Calomiris & Christopher Hanes, 1994. "Historical Macroeconomics and American Macroeconomic History," NBER Working Papers 4935, National Bureau of Economic Research, Inc.
    6. Michael D. Bordo & Christopher M. Meissner, 2015. "Growing Up to Stability? Financial Globalization, Financial Development and Financial Crises," NBER Working Papers 21287, National Bureau of Economic Research, Inc.
    7. Eugene N. White, 2014. "Lessons from the Great American Real Estate Boom and Bust of the 1920s," NBER Chapters, in: Housing and Mortgage Markets in Historical Perspective, pages 115-158, National Bureau of Economic Research, Inc.
    8. Charles Calomiris & Joseph R. Mason, 2003. "How to Restructure Failed Banking Systems: Lessons from the U.S. in the 1930's and Japan in the 1990's," NBER Working Papers 9624, National Bureau of Economic Research, Inc.
    9. Salter, Alexander W. & Veetil, Vipin & White, Lawrence H., 2017. "Extended shareholder liability as a means to constrain moral hazard in insured banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 153-160.
    10. Chu, Kam Hon, 2015. "Bank consolidation and stability: The Canadian experience, 1867–1935," Journal of Financial Stability, Elsevier, vol. 21(C), pages 46-60.
    11. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
    12. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093, January.
    13. Eugene N. White, 2015. "Protecting Financial Stability in the Aftermath of World War I: The Federal Reserve Bank of Atlanta's Dissenting Policy," NBER Working Papers 21341, National Bureau of Economic Research, Inc.
    14. Michael D. Bordo & David C. Wheelock, 2010. "The promise and performance of the Federal Reserve as lender of last resort 1914-1933," Working Papers 2010-036, Federal Reserve Bank of St. Louis.
    15. S. Mishkin, Frederic, 1999. "Financial consolidation: Dangers and opportunities," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 675-691, February.
    16. Mitchener, Kris James & Richardson, Gary, 2013. "Does “skin in the game” reduce risk taking? Leverage, liability and the long-run consequences of new deal banking reforms," Explorations in Economic History, Elsevier, vol. 50(4), pages 508-525.
    17. Gorton, Gary & Winton, Andrew, 2003. "Financial intermediation," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 8, pages 431-552, Elsevier.
    18. Eric Monnet & Miklos Vari, 2023. "A Dilemma between Liquidity Regulation and Monetary Policy: Some History and Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 915-944, June.
    19. Rockoff, Hugh, 2022. "Milton Friedman on bailouts," Journal of Financial Stability, Elsevier, vol. 63(C).
    20. Eric Monnet & Francois R. Velde, 2020. "Money, Banking, and Old-School Historical Economics," Working Paper Series WP-2020-28, Federal Reserve Bank of Chicago.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N2 - Economic History - - Financial Markets and Institutions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:20844. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.