Part I Developments at the National Level, 3 Supervision, Regulation, and Financial Stability

A basic continuing responsibility of any central bank—and the principal reason for the establishing of the Federal Reserve—is to assure stable and smoothly functioning financial and payment systems. These are prerequisites for, and complementary to, the central bank’s responsibility for conducting monetary policy. …Historically, in fact, the ‘monetary’ functions were largely grafted onto the ‘supervisory’ functions, not the reverse.1 3.01 This chapter deals with supervision (macro and micro), regulation, and financial stability, considering issues of institutional...