These are considered in the context of broad-policy considerations which render prudential supervision necessary, namely financial stability and depositor protection. The paper concludes with recommendations on policy priorities in this area. 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. Controlling for other factors, political systems that facilitate intersectoral power sharing dispose a country toward design features that accommodate risk-shifting by banks. This partially offsets the drop in foreign capital inflows in such periods, which are only marginally mitigated by reserves under some specifications of the model.
We document significant heterogeneity in the response of resident investors to financial stress and relate it to a previously undocumented channel through which reserves act as a buffer during financial stress. Our analysis focuses on how private interest-group pressures, outside influences, and political-institutional factors affect deposit-insurance adoption and design. For the whole period, we also find that larger stocks of reserves are linked to higher gross inflows and lower gross outflows. The paper concludes with recommendations on policy priorities in this area. The current text can at best be seen as a modest step in that direction. The analysis also reveals that the concept of 'prudential', despite its extensive use in banking regulation, has not been defined with adequate precision. What is needed is a rigorous analysis and review of the supervisory task-sharing framework, so that the right incentives are secured during all stages of the supervisory process.
This paper identifies factors that influence decisions about a country's financial safety net, using a comprehensive data set covering 180 countries during the 1960-2003 period. This site is like a library, you could find million book here by using search box in the widget. The paper identifies these changes starting with enhancements in the availability of information on banking groups to supervisors. Nations compete for deposits in order to protect their banking systems from the destabilizing impact of potential capital flight. The model is used to analyze the interaction between the regulatory equilibrium and several salient pre-crisis features: rising bank leverage; wholesale funding with asymmetric information; and increasing supervisional costs to disentangling bank asset exposures.
Finally, central banks can act as a liquidity backstop or a lender of last resort. The smooth functioning of our payment systems, in turn, depends on the safe operation of clearing infrastructure and the mitigation of liquidity risk. Supervision generates a positive externality. The paper concludes with recommendations on policy priorities in this area. The fact that the literature tends to find optimistic biases in national fiscal projections has led to a growing recognition in the academic and policy arenas of the need for independent forecasts in the fi scal domain, prepared by independent agencies, such as the European Commission in the case of Europe.
For this purpose, it is essential that policy makers integrate and harmonize the current debates on crisis management, resolution policy and good supervisory practices for cross border banking supervision. Policies are chosen to attract depositors who optimally respond to the expected return to deposits, which depends on both stability and deposit insurance levels. This paper examines the trends and composition of volatility across European banking systems from January 1988 to December 2010. It contains contributions from academics and practitioners from various disciplinary perspectives and from many regions of the world, illustrated with case studies from several sectors including water, natural gas and electricity distribution, local public transport, district heating, urban waste, and environmental services. The scope of these solutions may differ depending on the degree of interconnectedness. I urge all parties involved to accelerate progress in this area.
Non-coordinated policies will tend to yield too little supervision and too much deposit insurance. In both options, if a national compartment is depleted by payouts, there will be an ex-post fee paid only by banks domiciled in the corresponding country, until it is replenished. We argue that the changing composition of banking system volatility is the effect of a long-term integration process with a growing importance of cross-border activities that has not been influenced by the introduction of the Euro. The latter is composed of a Steering Committee, a supranational layer and a network of national supervisory authorities at the bottom, de facto establishing a complex multiple principals-multiple agents network. The paper concludes with recommendations on policy priorities in this area. Mutually acceptable solutions can and should be found to meet the legitimate expectations of all the authorities involved.
A robust result of the analysis is that international reserves facilitate financial disinvestment overseas by residents - a fall in capital outflows. The author studies the internal banking market of the European Union, the liberalisation of financial services trade in the World Trade Organization, the accords of the Basel Committee on Banking Supervision and the European Central Bank. Republishing and referencing Bruegel considers itself a public good and takes no institutional standpoint. We show that low interest rates may generate excessive risk taking. Policy makers are aware of the limitations of the existing institutional setting, but opinions on how to proceed, including on burden sharing, are lining up along national and regional political lines with less attention paid to European needs. Cross border banking supervision : incentive conflicts in supervisory information sharing between home and host supervisors English Abstract The global financial crisis has uncovered a number of weaknesses in the supervision and regulation of cross border banks.
In our role as central bank of issue for the euro, we focus solely on the interplay between central clearing and our monetary mandate. This contribution first discusses the issue concerning rules and discretion in the governance of the euro. This book examines the institutional structure reform of financial regulation from a comparative perspective, exploring both fundamental theories and international experiences. Somewhere between five and ten years is probably apt. Non-coordinated policies will tend to yield too little supervision and too much deposit insurance.
Controlling for macroeconomic shocks, quality of bank regulations, and institutional development, we find that both private and public interests, as well as outside pressure to emulate developed-country regulatory schemes, can explain the timing of adoption decisions and the rigor of loss-control arrangements. The important practical and theoretical issues highlighted in this volume clearly demonstrate that banking supervision currently stands at a crossroads. We study the optimal joint design of prudential supervision and deposit guarantee regulations in a multi-country, integrated banking market, where policy-makers have preferences regarding profitability and stability of the banking sector. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post. This paper explores the role of international reserves as a stabilizer of international capital flows, in particular during periods of global financial stress. Our proposal envisions country-blind protection of insured deposits. You can help correct errors and omissions.
We take a political econ-omy approach to regulation and assume that supervisors maximize the welfare of their own country. Let me clarify this by highlighting three channels through which central clearing interacts with core central bank objectives. For practical reasons, the legislative process probably has to wait until after the European Parliament election of 2019, but the Council could give a firm mandate, including a set duration for the transition, after a negotiation that need not last more than a few months. The contributors to this thoughtful volume examine the current state of prudential supervision, focusing on fundamental issues and key pragmatic concerns. The promotion of good practices for cooperation in supervisory colleges is thus not sufficient to address the existing incentive conflicts.