Since the mid-1990s worldwide efforts were undertaken to improve the effectiveness of financial supervision, through modifications in the architecture and governance. Did these improvements mitigate the 2008–2009 Crisis? This paper brings the first systematic analysis of the role of three main efforts: consolidation in supervision, decreasing central bank involvement and improving supervisory governance. The analysis employs a new and complex database on supervisory architecture and governance for 102 countries and uses two new indicators to evaluate the supervisory regime: the Financial Supervision Herfindahl Hirschman (FSHH) and the Central Bank Supervisor Share (CBSS) Indexes. The empirical tests allow us to disentangle the relative effects of the supervisory regimes on macroeconomic resilience. We conclude that two supervisory features—supervisory consolidation and supervisory governance—were negatively correlated with resilience, while central bank involvement in supervision did not have any significant impact. Our results show that the conditions under which micro-features of the supervisory design produce automatically macro-optimal outcomes are far from identified, and consequently contradict what was the generally accepted view before the crisis.

In the context of the proposed EU financial supervisory reforms, this paper focuses on the governance of the network of national supervisory banking agencies and the newly established Community supervisor (European Banking Authority, EBA). We assess to what extent lack of governance convergence nationally and with EBA could undermine the incentives for cooperation among supervisors. Convergence should particularly focus on (i) the issue of the presence of politicians on decision-making bodies; (ii) the need for clearly defining dismissal procedures of heads of supervision; (iii) autonomy from government in regulatory matters; (iv) supervisory autonomy in matters of licensing and withdrawing licenses; (iv) mechanisms for judicial accountability; (v) legal protection for supervisors handling in good faith. In the absence of full centralization of prudential supervision, early harmonization of national governance arrangements towards best practice would better align supervisors’ incentive structures and, hence, be beneficial for the effectiveness of European supervision.