Conflicts of interest and systemic risk

The financial crisis has uncovered many conflicts of interest. All of these concern regulators who are duty-bound to protect the taxpayer against malpractice. But it is now clear that some should seriously concern central bankers, as they potentially present a threat to financial stability. Here, I shall look at various types of malpractice from this point of view and suggest what might be done to resolve them.

There are two main types of malpractice. First, there is mis-selling by a business, o