ABSTRACT
The last chapter revolves around the notion of supervisory discretion. First, the theoretical background is established. This section examines the double nature of discretion, its behavioral implications, as well as the aspect of discretion as a way to disseminate market-relevant information. Second, discretion in the G-SIB-specific context is explored – the positive potential of this tool is examined, demonstrating how it could be beneficial for the financial system and the real economy if regulators made use of it. The next section answers the question implicitly asked by Chapter 3 – are the regulators exercising their G-SIB-oriented discretionary powers and adjusting the rules adequately, given it could vastly improve the system? Unfortunately not. This tendency is demonstrated based on examples and data from the USA and the EU. Further, possible obstacles keeping regulators from using their granted discretion are described. The last part of the chapter aims to answer the question how regulators can be incentivized to make use of these powers.
