Incentive Problems in Banking Supervision - the European Case

Incentive Problems in Banking Supervision - the European Case
Author: Martin Schüler
Publisher:
Total Pages: 36
Release: 2008
Genre:
ISBN:

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This paper discusses the incentive conflicts that arise in banking supervision in the EU in a principal-agent framework, where the regulator is the agent and the taxpayers is the principal. The regulatory agent in addition to maintaining financial stability (the objective of the principal) may pursue private interests. Incomplete information, insufficient accountability of the agent and lack of enforceability of compliance result in an incentive problem. A reform of the European supervisory system complemented by strengthening market discipline based on improved disclosure of both the supervisor and the banks may help to solve the European incentive problem.

Supervisory Incentives in a Banking Union

Supervisory Incentives in a Banking Union
Author: Elena Carletti
Publisher: International Monetary Fund
Total Pages: 50
Release: 2016-09-21
Genre: Business & Economics
ISBN: 1475537638

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We explore the behavior of supervisors when a centralized agency has full power over all decisions regarding banks, but relies on local supervisors to collect the information necessary to act. This institutional design entails a principal-agent problem between the central and local supervisors if their objective functions differ. Information collection may be inferior to that under fully independent local supervisors or under centralized information collection. And this may increase risk-taking by regulated banks. Yet, a “tougher” central supervisor may increase regulatory standards. Thus, the net effect of centralization on bank risk taking depends on the balance of these two effects.

International Financial Instability

International Financial Instability
Author: Douglas Darrell Evanoff
Publisher: World Scientific
Total Pages: 492
Release: 2007
Genre: Business & Economics
ISBN: 9812708731

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This book explores the potential and problems of bank safety and efficiency arising from the rapidly growing area of cross-border banking in the form of branches or subsidiaries with primarily only national prudential regulation. There are likely to be differences in the treatment of the same bank operating in different countries or of different banks from different home countries operating in the same country with respect to deposit insurance provisions, declaration of insolvency, resolution of insolvencies, and lender of last resort protection. The book identifies these protection problems and discusses possible solutions, such as greater cross-border cooperation, harmonization and organizations. The contributors to this book include experts from different countries and from a wide range of affiliations, including academia, regulators, practitioners, and international organizations. Sample Chapter(s). Chapter 1: Cross-Border Banking Regulation OCo A WayForward: The European Case (68 KB). Contents: Special Addresses: Cross-Border Banking Regulation OCo A Way Forward: The European Case (Stefan Ingves); Remarks before the Conference on International Financial Instability (Sheila C Bair); Benign Financial Conditions, Asset Management, and Political Risks: Trying to Make Sense of Our Times (Raghuram G Rajan); International Financial Instability: Cross-Border Banking and National Regulation Chicago OCo Dinner Remarks (Jean Pierre Sabourin); Landscape of International Banking and Financial Crises: Current State of Cross-Border Banking (Dirk Schoenmaker & Christiaan van Laecke); Actual and Near-Miss Cross-Border Crises (Carl-Johan Lindgren); A Review of Financial Stability Reports (Sander Oosterloo, Jakob de Haan, & Richard Jong-A-Pin); Discussion of Landscape of International Banking and Financial Crises (Luc Laeven); Causes and Conditions for Cross-Border Instability Transmission and Threats to Stability: Cross-Border Contagion Links and Banking Problems in the Nordic Countries (Bent Vale); Currency Crises, (Hidden) Linkages, and Volume (Max Bruche, Jon Danielsson & Gabriele Galati); What Do We Know about the Performance and Risk of Hedge Funds? (Triphon Phumiwasana, Tong Li, James R Barth & Glenn Yago); Remarks on Causes and Conditions of Financial Instability Panel (Garry Schinasi); Prudential Supervision: Home Country versus Cross-Border Negative Externalities in Large Banking Organization Failures and How to Avoid Them (Robert A Eisenbeis); Conflicts between Home and Host Country Prudential Supervisors (Richard J Herring); Cross-Border Nonbank Risks and Regulatory Cooperation (Paul Wright); Challenges in Cross-Border Supervision and Regulation (Eric Rosengren); Government Safety Net: Bagehot and Coase Meet the Single European Market (V tor Gaspar); Banking in a Changing World: Issues and Questions in the Resolution of Cross-Border Banks (Michael Krimminger); International Banks, Cross-Border Guarantees, and Regulation (Andrew Powell & Giovanni Majnoni); Deposit Insurance, Bank Resolution, and Lender of Last Resort OCo Putting the Pieces Together (Thorsten Beck); Insolvency Resolution: Cross-Border Resolution of Banking Crises (Rosa Mar a Lastra); Bridge Banks and Too Big to Fail: Systemic Risk Exemption (David G Mayes); Prompt Corrective Action: Is There a Case for an International Banking Standard? (Mar a J Nieto & Larry D Wall); Insolvency Resolution: Key Issues Raised by the Papers (Peter G Brierley); Cross-Border Crisis Prevention: Public and Private Strategies: Supervisory Arrangements, LOLR, and Crisis Management in a Single European Banking Market (Arnoud W A Boot); Regulation and Crisis Prevention in the Evolving Global Market (David S Hoelscher & David C Parker); Derivatives Governance and Financial Stability (David Mengle); Cross-Border Crisis Prevention: Public and Private Strategies (Gerard Caprio, Jr.); Where to from Here: Policy Panel: Cross-Border Banking: Where to from Here? (Mutsuo Hatano); Remarks on Deposit Insurance Policy (Andrey Melnikov); The Importance of Planning for Large Bank Insolvencies (Arthur J Murton); Where to from Here: Policy Panel (Guy Saint-Pierre); Some Private-Sector Thoughts on Home/Host-Country Supervisory Issues (Lawrence R Uhlick). Readership: Academics and upper-level undergraduate or graduate students in the areas of financial institutions, banking, financial regulation, or international financial markets; financial regulators, policy-makers, and consultants."

European Banking Supervision

European Banking Supervision
Author: André Sapir
Publisher:
Total Pages: 182
Release: 2016-06-14
Genre: Business & Economics
ISBN: 9789078910411

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European banking supervision, also known as the Single Supervisory Mechanism, is the first and arguably the main component of European banking union. In late 2014, the European Central Bank became the supervisor for the region's largest banking groups; the ECB also oversees the supervision by national authorities of smaller banks. This Blueprint is the first in-depth study of how this ground-breaking reform is working in practice. Despite teething troubles and occasional misjudgements, this assessment finds that overall European banking supervision has been effective, demanding and broadly fair, at least for the banks under the ECB's direct watch. Even so, achieving a truly single market in banking services will require more time, further supervisory initiatives and new Europe-wide regulatory and legislative steps.

Financial Stability Policy in the Euro Zone

Financial Stability Policy in the Euro Zone
Author: Gundbert Scherf
Publisher: Springer Science & Business Media
Total Pages: 273
Release: 2013-06-17
Genre: Business & Economics
ISBN: 3658009837

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​Due to the lack of political salience that financial stability policy enjoys in tranquil economic times, this policy field lends itself particularly well to capture – the more so the more important the role of banks is in the financial system. Gundbert Scherf’s research focuses on this nexus between integrated banking, supranational monetary policy and national banking regulation. He finds that national level differences in financial systems and related institutions explain and drive variation in regulatory financial stability policy across countries.

Bank Leverage and Monetary Policy's Risk-Taking Channel

Bank Leverage and Monetary Policy's Risk-Taking Channel
Author: Mr.Giovanni Dell'Ariccia
Publisher: International Monetary Fund
Total Pages: 41
Release: 2013-06-06
Genre: Business & Economics
ISBN: 1484381130

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We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.

Rethinking Bank Regulation

Rethinking Bank Regulation
Author: James R. Barth
Publisher: Cambridge University Press
Total Pages: 446
Release: 2008-05-12
Genre: Business & Economics
ISBN: 9780521709309

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This volume presents a new database on bank regulation in over 150 countries. It offers a comprehensive cross-country assessment of the impact of bank regulation on the operation of banks and assesses the validity of the Basel Committee's influential approach to bank regulation.

Liberalization of Trade in Banking Services

Liberalization of Trade in Banking Services
Author: Bart De Meester
Publisher: Cambridge University Press
Total Pages: 409
Release: 2014-07-10
Genre: Business & Economics
ISBN: 1107038499

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To what extent does WTO and EU law restrict governments to determine a balance between regulation and liberalization of banking?

The Logic of Financial Nationalism

The Logic of Financial Nationalism
Author: Federico Lupo-Pasini
Publisher: Cambridge University Press
Total Pages: 309
Release: 2017-08-18
Genre: Law
ISBN: 1108101364

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Using case studies ranging from cross-border bank resolution to sovereign debt, the author analyzes the role of international law in protecting financial sovereignty, and the risks for the global financial system posed by the lack of international cooperation. Despite the post-crisis reforms, the global financial system is still mainly based on a logic of financial nationalism. International financial law plays a major role in this regard as it still focuses more on the protection of national interests rather than the promotion of global objectives. This is an inefficient approach because it encourages bad domestic governance and reduces capital mobility. In this analysis, Lupo-Pasini discusses some of the alternatives (such as the European Banking Union, Regulatory Passports, and international financial courts), and offers a new vision for the role of international law in maintaining and fostering global financial stability. In doing so, he fills a void in the law and economics literature, and puts forward a solution to tackle the problems of international cooperation in finance based on the use of international law.