Effectiveness of Prudential Regulations for Banks

Effectiveness of Prudential Regulations for Banks PDF

Author: Ashish Srivastava

Publisher: Eliva Press

Published: 2021-05-30

Total Pages: 92

ISBN-13: 9781636482187

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Banking regulations aim to strengthen financial stability and promote policies that foster safety, consistency, reliability, fairness, and inclusion in the financial products and services offered by banks. The context of discussions in this book, spread over five carefully selected chapters, is the Indian financial system with a global perspective. It highlights the need for continual improvement in the effectiveness of regulatory and supervisory processes to achieve stability, transparency, and robustness in financial institutions and financial markets. The effectiveness of prudential regulations depends upon the institutional credibility, deterrents, and enforcement mechanism. Moreover, prudential regulations should maintain pace with the time and changing dynamics of the financial system. Putting in place clear, uncomplicated regulations, and shunning complexity in the regulatory and supervisory processes helps in achieving the intended outcomes. Besides, inadequate internal controls, false assumptions about markets and liquidity, and lack of due diligence processes in financial institutions contribute to their failures and hence, it is a regulatory challenge to incentivize the banks to join the regulators in pursuit of effective risk optimization, and achieving the common good of a stable, fair, and efficient financial system. Liquidity remains a crucial focus of prudential regulations and it is important to understand the behavioural biases such as overconfidence, linear extrapolation, confirmation bias, and group-think, which hamper effective liquidity risk management in regulated institutions. An increasingly expanding toolkit of the perpetrators of financial crimes as a latent malfunction of global integration of financial systems and the advent of digital transactions is another matter of concern for regulators requiring enhanced focus on the gatekeepers. Finally, the financial innovations and technological advancements in the world of alternative finance require an appropriate regulatory structure that facilitates an orderly growth of alternative finance within the traditional financial landscape. This book offers a crisp reading on these key areas and presents a nuanced approach to improve the effectiveness of the prudential regulations.

Financial Stability and Prudential Regulation

Financial Stability and Prudential Regulation PDF

Author: Alison Lui

Publisher: Taylor & Francis

Published: 2016-10-04

Total Pages: 232

ISBN-13: 1317480236

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Financial stability is one of the key tenets of a central bank’s functions. Since the financial crisis of 2007-2009, an area of hot debate is the extent to which the central bank should be involved with prudential regulation. This book examines the macro and micro-prudential regulatory frameworks and systems of the United Kingdom, Australia, the United States, Canada and Germany. Drawing on the regulator frameworks of these regions, this book examines the central banks’ roles of crisis management, resolution and prudential regulation. Alison Lui compares the institutional structure of the new ‘twin-peaks’ model in the UK to the Australian model, and the multi-regulatory US model and the single regulatory Canadian model. The book also discusses the extent the central bank in these countries, as well as the ECB, are involved with financial stability, and argues that the institutional architecture and geographical closeness of the Bank of England and Financial Policy Committee give rise to the fear that the UK central bank may become another single super-regulator, which may provide the Bank of England with too much power. As a multi-regional, comparative study on the importance and effectiveness of prudential regulation, this book will be of great use and interest to students and researchers in finance and bank law, economics and banking.

Prudential Regulation and Banking Supervision

Prudential Regulation and Banking Supervision PDF

Author: Vincent P. Polizatto

Publisher: World Bank Publications

Published: 1990

Total Pages: 37

ISBN-13:

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To establish an effective program of banking supervision and prudential regulation, the public policy role of bank supervision must be clearly defined and understood and actions taken along several parallel tracks to strengthen the bank supervisory process, the legal framework, accounting and auditing, and the institutions themselves.

Prudential Supervision

Prudential Supervision PDF

Author: Frederic S. Mishkin

Publisher: University of Chicago Press

Published: 2009-02-15

Total Pages: 378

ISBN-13: 0226531937

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Since banking systems play a crucial role in maintaining the overall health of the economy, the adverse effects of poorly supervised systems may be quite severe. Without some form of vigilant external oversight, banking systems could fall prey to excessive risk taking, moral hazard, and corruption. Prudential supervision provides that oversight, using government regulation and monitoring to ensure the soundness of the banking system and, by extension, the economy at large. The contributors to this thoughtful volume examine the current state of prudential supervision, focusing on fundamental issues and key pragmatic concerns. Why is prudential supervision so important? What kinds of excess must it guard against? What particular forms does it take? Which of these are the most effective deterrents against mismanagement and system overload in today's rapidly shifting financial climate? The contributors foresee a continued movement beyond simple regulatory rules in banking and toward a more active evaluation and supervision of a bank's risk management practices.

Islamic Banking

Islamic Banking PDF

Author: Mr.Luca Errico

Publisher: International Monetary Fund

Published: 1998-03-01

Total Pages: 33

ISBN-13: 1451980418

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This paper analyzes the implications of Islamic precepts on banks’ structure and activities, focusing on banking supervision issues. It points out and discusses these issues in the context of a paradigm version of Islamic banking, as well as in frameworks that fall between the paradigm version and conventional banking. The case of Islamic banks operating in a conventional system is also examined.

E-Money: Prudential Supervision, Oversight, and User Protection

E-Money: Prudential Supervision, Oversight, and User Protection PDF

Author: Mr. Marc C Dobler

Publisher: International Monetary Fund

Published: 2021-12-14

Total Pages: 34

ISBN-13: 1513593404

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This departmental paper discusses the evolving prudential frameworks for nonbank issuers of electronic money. Some jurisdictions take a relatively light-touch approach to regulating electronic money issuers (EMIs). Others have sought to apply more stringent requirements to protect electronic money (e-money) users, as the sector has grown in importance. The paper aims to build on previous IMF staff contributions to the literature and to draw policy conclusions for strengthening e-money regulatory regimes; in particular in jurisdictions where issuers, individually or collectively, have grown to a size to which they are of macro-financial importance (see below). Chapter 2 provides background on the development of e-money, its economic benefits, and potential risks. Chapter 3 discusses prudential supervision of EMIs, followed in Chapter 4 by their oversight from a payments system perspective. Chapter 5 discusses potential additional measures for user protection and contingency arrangements for EMI failure. The last chapter presents policy recommendations for policymakers, especially in those emerging market economies and developing countries wherein EMIs have reached a scale at which they could have a significant economic impact if they were to fail.

Analyzing the Interest Rate Risk of Banks Using Time Series of Accounting-Based Data

Analyzing the Interest Rate Risk of Banks Using Time Series of Accounting-Based Data PDF

Author: Oliver Entrop

Publisher:

Published: 2016

Total Pages: 48

ISBN-13:

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This paper describes the first thorough analysis of the interest risk of German banks on an individual bank level. We develop a new method that is based on time series of accountingbased data to quantify the interest risk of banks and apply it to analyze the German banking system. We find evidence that our model yields a significantly better fit of banks' internally quantified interest rate risk than a standard approach that relies on one-point-in-time data, and that the interest rate risk differs between banks of different size and banking group. Additionally, we find structural differences between trading book and non-trading book institutions.

The Role of Prudential Regulation of Banks in Promoting Financial Stability

The Role of Prudential Regulation of Banks in Promoting Financial Stability PDF

Author: Mulalo Tshikovhele

Publisher:

Published: 2019

Total Pages:

ISBN-13:

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The financial crises of the past have proven that prudent and effective systems of bank regulation are crucial in preserving and maintaining a resilient financial system. Banks play a significant role in the economic environment and their stability and soundness is imperative to prevent financial crises. Changes in the market and developments in banking practices have increased the risk exposures of banks. Through the contagion effect, the failure of one bank may have far-reaching consequences for other banks and the financial system as a whole. Essentially, enhanced and effective banking regulation is pertinent to safeguard the financial system. As a regulatory response to these financial crises, capital and liquidity requirements of banks have been developed and adopted internationally, over the years, with the purpose to preserve the integrity of the global financial system. These frameworks of international banking regulation have been adopted through the Basel Accords, which are premised on strengthening the resilience of banks to withstand financial pressures. The 2008 Global Financial Crisis prompted the need to revise the previous regulatory instruments, resulting in the introduction of the latest international regulatory framework known as Basel Ill. In South Africa, these international standards of banking regulation have been transposed into the relevant legislative instruments regulating banks in a proactive effort to enhance and preserve the stability of banks. This dissertation discusses the aspect of bank regulation and how prudential regulation, as a regulatory tool, contributes to the promotion of financial stability. The study critically discusses the capital and liquidity requirements of banks as set out in the Basel Accords and analyses their ability, as mechanisms of prudential regulation, to preserve a resilient financial system. The dissertation further considers how these international standards of banking regulation have been adopted into South African law. This is done by considering the legislative and regulatory instruments regulating banks and the role of the South African Reserve Bank in facilitating compliance by banks.

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