Quantification of Central Bank Supervisory Power

Financial crisis which started in 2007/2008 again raised the question about the central bank function in financial sector supervision. Giving the financial sector's supervisory function to a central bank offers advantages and disadvantages. To quantify and to better understand the central bank involvement in different countries, Financial Supervision Herfindahl Hirschman (FSHH) Index has been created. The aim is to measure the supervisory power concentration in some country, as well as the Central Bank Share in Supervision (CBSS) Index. This paper presents enhanced FSHH index (eFSHH), which includes shares of three main parts of the financial system: banking, insurance and securities in their total. On a sample that was used to describe FSHH index, differences between FSHH and eFSHH are explained and new CBSS is calculated. If one part of the financial system has bigger share of the entire financial system then supervisory agency of this part will have higher index using eFSHH comparing to FSHH. Consequently, CBSS results will display higher values if that agency is the central bank of a country.