“The first and rather traditional source of concern regarding the role of central banks in banking supervision refers to the “Chinese wall” theory, according to which the same body cannot be in charge of monetary policy and banking supervision. Such a double function is acceptable if the central bank is not independent. But if the central bank has the ability of fixing interest rates, there are risks of conflicts of interests: so a central bank in charge of banking supervision could be inclined to lower interest rates in consideration of the critical situation of a creditworthy institution, even if inflationary expectations would justify the opposite behaviour”

Source; Patta (p. 3)