Monetary policy and banking supervision: coordination instead of separation. CEPS Policy Brief No. 286, 12 December 2012

Introduction. Following the June 2012 European Council decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions. The authors argue, in fact, that a strict separation of supervision and monetary policy is not even desirable during a financial crisis when the systemic stability of the financial system represents the biggest threat to a monetary policy that aims at price stability. In their view, the key problem hampering the ECB today is that it lacks detailed information on the state of health of the banking system, which is often highly confidential. Chinese walls would not solve this problem. Moreover, in light of the fact that the new, proposed Supervisory Board will be composed to a large extent of representatives of the same institutions that also dominate the Governing Council, the paper finds that it does not make sense to have Chinese walls between two boards with largely overlapping memberships. In addition, it recommends that some members of the Supervisory Boards should be “independents” in order to reduce the tendency of supervisors to unduly delay the recognition of losses.

Earworms ("stuck song syndrome"): towards a natural history of intrusive thoughts

Two studies examine the experience of “earworms”, unwanted catchy tunes that repeat. Survey data show that the experience is widespread but earworms are not generally considered problematic, although those who consider music to be important to them report earworms as longer, and harder to control, than those who consider music as less important. The tunes which produce these experiences vary considerably between individuals but are always familiar to those who experience them. A diary study confirms these findings and also indicates that, although earworm recurrence is relatively uncommon and unlikely to persist for longer than 24 hours, the length of both the earworm and the earworm experience frequently exceed standard estimates of auditory memory capacity. Active attempts to block or eliminate the earworm are less successful than passive acceptance, consistent with Wegner’s (1994) theory of ironic mental control.