The Multi-Agencies Dilemma of Delegation: Why Do Policymakers Choose One or Multiple Agencies for Financial Regulation?

Abstract

The article asks the following question: Why do policymakers choose one (or more) agent(s) to perform new delegated policy functions? In order to shed light on the factors that drive policymakers' choice of a single or a multiple agencies delegation framework, the article investigates policymakers' choice to delegate macroprudential regulatory responsibility to either the central bank or to a committee made up of more than one financial regulator. Based on the analysis of an original dataset in 53 countries, we show that the choice among alternative delegation frameworks is driven by the logic of “policy control”: policymakers, who want to control policies with distributive consequences, choose the single agency model under conditions of political uncertainty and low agency independence.