The Dynamics Of Banking And Financial Reform

The Financial Stability Board (FSB) to improve recommendations to support the oversight and instruction of the shadow banking system by mid-2011 in collaboration with other international standard setting bodies. The FSB formed a task force to develop initial recommendations for discussion that would set out potential approaches for monitoring the shadow banking system; and explore possible regulatory measures to address the systemic risk and regulatory arbitrage concerns posed by the shadow banking system.

In the aftermath of the 2008 financial crisis, Congress recognized the need to regulate nonbank institutions. Many of the financially distressed institutions were not regulated by the same standards bank holdings were. As a result The Financial Stability Oversight Committee was created under Title I of the Dobb-Frank Wall Street Reform and Consumer Protection Act. The committee was signed into law by Barack Obama on July 21, 2010 and serves three primary purposes. One is to authorize and determine nonbank financial institutions that if under material financial distress or failure, can threaten the financial stability of the United States. The designated institutions are referred to as systematically important financial institutions (SIFIs) and are subject to the regulation and supervision of the Federal Reserve System (Board of Governors). Another purpose of the committee is to promote market discipline and eliminate the expectation of companies stakeholder’s relying on the U.S. government bailout as safeguard from failure or loss. Last but not least the committee is also expected to recommend standards and safeguards for U.S. and global financial systems. In the executive summary of the 2014/15 annual reports, the committee continues focusing on three areas of financial risk: cyber security, foreign markets and the housing finance reform.

The initial cause of the financial turbulence is attributed to the U.S. sub-prime residential mortgage market. The sustained rise in asset prices, particularly house prices, on the back of excessively accommodative monetary policy and lax lending standards during 2002-2006, increased innovation in the new financial instruments, unusual low interest rates resulted in a large rise in mortgage credit to households; particularly low credit quality households, the greed of investors’ for ever higher returns coupled with very minimal down payments, along with the dependence on major global rating agencies, allowed complex investments products to be sold to an

This way, such is critical to acknowledge the need to strengthen policy coordination and regulatory harmonization among the ASEAN economies. The experiences that can be borrowed from recent events on the European Union highlight the significance of adopting a regional perspective to financial stability. A supranational oversight mechanism is likely to be of vital important in a single market to facilitate financial services. It is essential that a single resolution regime that has a common backstop such as deposit insurance is considered in

the charter. Following the end of the second bank, the U.S. saw another period of high inflation,

In addition, different countries use different accounting systems in calculating total assets which can produce divergent and more importantly incomparable figures, making measuring systemic importance solely by “size” more problematic (Barth et al., 2013). Policymakers and scholars have hence started to realise the difference between the size and the systemic importance of a financial institution (Zhou, 2010). For example, after Group of Twenty (G-20) quickly established the Financial Stability Board (FSB) at the 2009 London Summit for the purpose of developing and implementing reform agenda to ensure the stability of the financial system, FSB was assigned by G-20 during 2010 Seoul summit to identify global systemically important financial institutions (G-SIFIs) which pose systemic risk to both national and international financial systems (Barth et al., 2013). A year before that, FSB has recognised three important indicators of systemic importance, namely the size, interconnectedness and substitutability of a financial institution (Bongini & Nieri, 2014). In July 2011, the Basel Committee on Bank Supervision (BCBS) (2013) publicised a document which provides a detailed methodology for assessing systemic importance of G-SIBs (globally systemically important banks) , further including the measures of complexity and cross-jurisdictional activity on top of the three submitted by FSB. This methodology therefore identifies five equally-weighted (20%)

-Actively managed funds are managed by “experts” who choose certain stocks for you, with this there are fees as they are managing for you. According to CNN Money, fees can range from 0.6% to 1%, and with hiring these experts many would assume they would do better and outperform the market. Assuming that these

Basel III is a set of proposed changes to international capital and liquidity requirements and some other related areas of banking supervision. It is the second major revision to an original set of rules, now known as Basel I, which was promulgated by the Basel Committee in 1988. The committee was established in the mid‐1970’s, after the failure of a small German bank (Herstatt) sent shudders through the global financial system as a result of poor coordination between national regulators. The Basel Committee is composed of banking regulators from a number of industrialized countries, with a core membership concentrated in the traditional banking powers within Europe, plus the US and

The 2008 Global Financial Crisis (GFC) and its aftermath had critically damaged the world economy with a drag in global economic growth. Indubitably, the imprudence in which banks managed their risks and capital holdings were among reasons that caused the crisis. It raised the need for industry reform, leading to G20’s Basel III proposal in 2010 to strengthen the global capital framework by imposing stricter rules regarding capital and liquidity requirements, as well as a focus on transparency, consistency and quality.

We observe very large and rapid declines in the policy rate (the very short rate) in late 2008 and early 2009. Considering the US, the UK, and Japan, did long rates fall as much around that time or less or more?

The year 2008 saw the world usher a new era in the role of central banks in protecting the economy. Banks were increasingly coming under pressure following the collapse of the subprime mortgage market in the US and resulting contagion across the globe. The result was a widespread crisis of a global proportion (Atkinson, Luttrel & Rosenblum 2011).

There is a vast amount of literature available on the additional procyclicality of regulatory capital charges in Pillar 1 of Basel II. In this section, we shall briefly visit this literature and see if any conclusions can be drawn from this, before proceeding to the conclusion and mitigation of these procyclical effects. The majority of the literature, as expected, focuses primarily on the IRB approach, as this aspect of Basel II has drawn the most criticism from financial practitioners and academics alike. The greater part of this literature has found that there is an overwhelmingly substantial rise in procyclicality of minimum regulatory capital charges originating

Much of the today’s research expressly shows that not only the prosperity, but also the entire existence of the global financial institutions is seriously jeopardized nowadays. Thus, in spite of the fact that a great deal of technological advancements has been discovered by the global community, together with the improvements of communication and business operations, this technological revolution brought many challenges simultaneously (Kim 2014).

Every year, International Financial Institutions engage themselves in several projects related to the improvement of the world through financial means. International Financial Institutions were created after World War II in order to “prevent another worldwide economic cataclysm like the Great Depression that had destabilized Europe and the United States” (Globalization 101, n.d). The way in which International Financial Institutions do this is by ensuring the cooperation between markets and managing a financial system around the world. Some of the projects of improvement include the

Surveillance: For maintaining stability as well as to check crises towards international monetary system, a review is made by IMF towards policies of the countries, regional national as well as global economic as well as financial developments by means of a formal system termed as surveillance. Advices are given by IMF to its member countries (188), reassuring policies which can foster towards economic steadiness, minimize vulnerability towards economic as well as financial crises as well as uplifting living standards. This gives consistent assessment towards global visions towards World Economic Outlook, towards financial markets for report on global financial stability,