According to the current literature concentrating monetary policy and supervisory policy functions in the central bank weakens the anti-inflationary credibility of this institution. In this paper we show that, if central banks behave as political players, exercising banking supervision can allow...

One of the most widely supported arguments against attributing supervision functions to a central bank is based on the conflict of interest hypothesis.However, in some circumstances, financial supervision enhances central bank's independence. In fact, when a central bank is goal independent, it...