Although there is widespread support for a systemic risk regulator, there is little agreement on which existing or new organization(s) should assume the task of regulating against systemic risk, the authority such a regulator should have, or the work such a regulator should undertake. Unfortunately, much of this debate has been in the form of turf warfare among financial regulators, and therefore discussions have been less enlightened than one would have hoped given the magnitude of the problems uncovered during the financial meltdown of 2008.
In my opinion, a systemic risk regulator should be a monitor, not a regulator, and should be an independent agency separate from prudential regulators. It should have the power to make recommendations to primary regulators, and these regulators should be compelled to adopt such recommendations or explain why they are not doing so.
