Shadow Banking and Financial Regulation

2012 ◽  
Author(s):  
Steven L. Schwarcz
Keyword(s):  
Financial Regulation ◽  
Shadow Banking

China's new finance regulator will gain real power

2017 ◽  
Keyword(s):  
Financial Stability ◽  
Financial Regulation ◽  
Debt Management ◽  
Shadow Banking ◽  
Equity Financing ◽  
Public And Private ◽  
Financial Reforms ◽  
Content Type ◽  
Government Relations ◽  
Local Officials

Subject Reform of financial regulation in China. Significance The National Financial Work Conference, a secretive five-yearly meeting that decides on major financial reforms, was finally held on July 14 and 15, after being delayed twice. The Conference established a Financial Stability and Development Committee under the State Council that will work to ensure better regulatory coordination to tackle debt and shadow banking risks. Impacts 'Financial reform' now means regulation rather than opening; measures such as renminbi internationalisation will be slower and more prudent. More heads will roll in the financial sector (public and private), given enhanced accountability for wrongdoing or risk-prone actions. Foreign financial institutions will need to rethink their government relations strategy and readjust to the role of the new stakeholder. Approvals for stock market listings will sustain their current momentum as direct financing, especially equity financing, is encouraged. Local government debt will likely decrease now that local officials have lifelong liability for bad debt-management decisions.

scholarly journals Financial Regulation: Still Unsettled a Decade After the Crisis

2019 ◽  
Vol 33 (1) ◽  
pp. 61-80 ◽  
Author(s):  
Daniel K. Tarullo
Keyword(s):  
Financial Stability ◽  
Financial Regulation ◽  
Legal Framework ◽  
Regulatory Framework ◽  
The Political ◽  
Shadow Banking ◽  
Unfinished Business ◽  
Short Term ◽  
The Us ◽  
The Moment

A decade after the darkest moments of the financial crisis, both the US financial system and the legal framework for its regulation are still in flux. The post-crisis regulatory framework has made systemically important banks much more resilient. They are substantially better capitalized and less dependent on runnable short-term funding. But the current regulatory framework does not deal effectively with threats to financial stability outside the perimeter of regulated banking organizations, notably from forms of shadow banking. Moreover, with the political tide having for the moment turned decisively toward deregulation, there is some question whether the resiliency improvements of the largest banks will be preserved. This article assesses the accomplishments, unfinished business, and outstanding issues in the post-crisis approach to prudential regulation.

scholarly journals Financial Markets: From the “Tragedy of Commons” to Balanced Regulation

2020 ◽  
Vol 15 (2) ◽  
pp. 173-190
Author(s):  
Anastasia Podrugina ◽  
◽  
Anton Tabakh ◽  
Keyword(s):  
Financial Markets ◽  
Financial Stability ◽  
Banking Sector ◽  
Financial Regulation ◽  
Financial System ◽  
Political Influence ◽  
Regulation System ◽  
Shadow Banking ◽  
Financial Industry ◽  
Tax Legislation

Nowadays the global financial system faces a triple challenge: the threat of a new systemic financial crisis at both global and regional levels; difficulties of constant adaptation of existing financial business and regulatory practices to intensive technological innovations; direct and hidden consequences of excessive political influence on the financial system through sanctions and selectively applied practices for sanction purposes. Improving the quality of financial regulation will require deeper cooperation between regulators of leading economies and a proactive position of the financial industry, as well as the decentralization of financial regulation. However, it is unlikely that this will happen at the global level. Financial stability became a key goal of global financial regulation in the post-crisis period. We consider financial stability as the «tragedy of commons». The article describes the main trends of financial markets regulation after the crisis: transformation of global financial architecture, anti-money laundering and counter-terrorism financing practices (AML/ CT), financial sanctions. The article analyzes the existing failures of modern post-crisis financial regulation: credit crunch, reduction in the effectiveness of monetary policy, regulatory arbitrage, and increased compliance costs (AML/CT legislation, tax legislation, and the sanctions regime). In the future we expect simultaneous trends of harmonization and standardization of requirements in traditional sectors of financial markets (including traditional institutions of the shadow banking sector), but at the same time regulatory arbitrage1 will induce new financial technologies in order to reduce regulatory costs. The crisis triggered by the coronavirus pandemic in 2020 despite its non-financial nature will almost inevitably have a major impact on financial markets and their regulation. Possible steps to eliminate failures in the financial regulation system are proposed, including recommendations for international organizations.

scholarly journals Banking and Financial Regulation

2017 ◽  
pp. 422-446
Author(s):  
Steven L. Schwarcz
Keyword(s):  
Economic Development ◽  
Financial Regulation ◽  
Financial System ◽  
Shadow Banking ◽  
Universal Principles

This chapter focuses on the universal principles of banking and financial regulation. Banking and financial regulation is needed to protect the financial system, which provides functions essential to economic development. Traditionally, financial regulation focused on banking because banks historically have aggregated moneys (primarily by taking deposits from customers) and then allocated those monies (by making loans to borrowers). Traditional financial regulation is geared toward ensuring that deposit-taking banks can continue to perform these functions efficiently. In recent years, however, shadow banking has begun to overtake traditional banking. Financial regulation has two overall goals: to ensure that the components of the financial system—firms and markets—can efficiently perform their underlying economic functions, and to ensure the financial system’s ability to itself function as a network within which those components can operate.

scholarly journals Overhauling China’s Financial Stability Regulation: Policy Riddles and Regulatory Dilemmas

2017 ◽  
Vol 4 (1) ◽  
pp. 1-57 ◽  
Author(s):  
Emilios AVGOULEAS ◽  
Duoqi XU
Keyword(s):  
Financial Stability ◽  
Banking Sector ◽  
Financial Regulation ◽  
Banking System ◽  
Big Bang ◽  
Shadow Banking ◽  
Financial Repression ◽  
Leverage Ratio ◽  
Regulation Policy ◽  
Shadow Banking System

AbstractChina faces a number of important financial-stability risks. A persistent feature of the Chinese banking sector is the rapid formation of non-performing loans (NPLs) during each business cycle. Moreover, lending restrictions and interest-rate caps (“financial repression”) have, in part, given rise to an ever-expanding shadow-banking sector. The article highlights five cardinal sins within the Chinese financial system: (1) bad lending practices by the regulated sector, (2) lax governance, (3) a shadow-banking system that is dominated by short-term claims with no liquidity backstop, (4) stark lack of transparency in the shadow sector, and (5) very high levels of interconnectedness between the shadow and the regulated sector. The article suggests that some of these problems will be alleviated through a regulatory big bang that would abolish the current silo approach to financial regulation streamlining financial stability and conduct/consumer-protection supervision. Furthermore, we recommend the introduction of a binding and all-encompassing leverage ratio that will require banks to hold much higher capital buffers as a means to boost bank resilience, reduce NPLs, and battle interconnectedness with the shadow sector.

scholarly journals Understanding banking regulatory and market framework in South Africa including the perceived strength, weaknesses, opportunities and threats

2014 ◽  
Vol 3 (3) ◽  
pp. 34-43 ◽  
Author(s):  
Tankiso Moloi
Keyword(s):  
South Africa ◽  
Banking Sector ◽  
Financial Regulation ◽  
Global Financial Crisis ◽  
Regulatory System ◽  
Banking Regulation ◽  
Developed Countries ◽  
Unintended Consequences ◽  
Shadow Banking ◽  
Market Framework

Following the global financial crisis of 2007, the manner in which banks conduct their business became the subject of interest to authorities. In South Africa, most analysts argued that the financial system was insulated by the prudent regulatory system. This paper reviewed the banking regulation and market framework applicable in the South African context. In reviewing regulation and banking market framework, it was found that the principal legal instrument which seeks to achieve credibility, stability and economic growth, is the Banks Act, No. 94 of 1990 (the Banks Act). Considering the applicable regulation, the paper concluded that South Africa has a developed and well regulated banking system which compares favourably with regulatory environment applied by the developed countries. It was, however; cautioned that further regulation such as the recently announced ‘Twin Peaks’ approach to financial regulation could result in unintended consequences, such as driving a larger share of activity into the shadow banking sector.

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