Key Supervisory Issues And Improvement Of Banking Regulation

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

Firstly, the Dodd–Frank Act pushes forward the reformation of America's financial regulatory system. Several new regulatory authorities are set up to enhance the government supervision and administration of the industry. The Financial Stability Oversight Council is established to identify material risks to financial stability, with the support from Office of Financial Research. Moreover, Fed is entitled to exercise additional superintendence beyond banks.

Intervention by the central bank is warranted to avoid welfare loss for the institution’s stakeholders since it may be that due to access to supervisory information, the authorities are in a better position to evaluate the financial position of a bank rather than the inter-bank market. The other situation in which the central bank may be the LOLR is when the stability of the entire financial system may be threatened following the failure of a solvent bank. This widespread financial instability may put to risk the ability of the financial system to carry out its primary functions.

Basel III is a global comprehensive collection of restructured regulatory standards on bank capital adequacy and liquidity. It was developed by the Basel Committee on Banking Supervision to strengthen the regulation, supervision and risk management of the banking sector (bis.org, 2010). It introduces new regulatory requirements on bank liquidity and bank leverage in response to the financial downturn caused by the Global Financial Crisis. Stefan Walter, Secretary General of the Basel Committee on banking supervision said in November 2010:

First, high capital requirements could enable institutions to be more flexible facing financial stress and crises. Second, the CFPB strengthens the oversight responsibilities, lessens the regulatory infrastructure risky gaps, and improves the protection for consumers. Third, the Federal Deposit Insurance Corporation’s (FDIC) single-point-of-entry strategy installs standard procedures to wind down failed financial institutions,

In the past what was it like for black people being prosecuted in court? “To Kill A Mockingbird” is a novel written by, Harper Lee, describing the prosecution of an innocent black man. This novel explains Harper Lee’s life growing up in the thought of a perfect life, but her life starts to change when she gets older. As well, this book explains racism, to a young child that’s living through this in their lives. The points that were chosen were courage, cowardice, and end of innocence.

The American Banking system has always focused on order, resiliency and the ability to withstand the storm. When comparing banking systems, it is required analyze both the strengths and the weaknesses of each system. While examining the American banking system, a key strength that is presented is the pride if its resiliency, “these improvements in the resiliency of the banking system have been reinforced by a series of key capital and liquidity rules that have been enacted in the United States, including the Basel III capital and liquidity frameworks as adopted in more stringent form” (The State of American Banking).

The reality of systemic risk made the task of regulating the financial system increasingly complicated, as the crises aren’t contained in one country or market. The extreme inter-dependence between the different agents is the main reason why we need regulation today, as some misconducts can cause a domino effect, affecting markets globally. The structure of the banking system in itself explains this process. In the finance industry, banks borrow money from other banks. If one bank fails, the one who lent the funds in the first place might also follow the same path, creating panic in the markets. The government’s first prerogative is to protect its citizens from these

The 2008 financial crisis should not be the last one readers will experience, but this paper would like to present a picture of how it unfolded and where went wrong, so that hopefully we can learn from it. This paper will address some post-crisis regulations and why regulators responded this way. It concludes that the key is to carry out reforms addressing the moral hazard issue deeply in our current financial system.

Every year, millions of immigrants come into the United States. Generally, the United States policies are complex but the topic of immigration in the country is far more complicated to understand. Currently, the topic is extremely controversial yet the government has been trying to avoid addressing it for quite a while now. Nevertheless, it is very rare for a candidate to make immigration policy part of his platform but in the 2016 presidential election Donald Trump even made it part of his campaign which caused world-wide controversy. Trump claimed that he would “make America great again” and create a high security wall along the border between Mexico and the United States. Nevertheless, any decision taken by the government will affect everyone in the country, whether in a positive or negative manner, as “an estimated 11.4 million unauthorized immigrants were living in the United States in January 2012 compared to 11.5 million in January 2011.” The numbers keep increasing every day

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.

Since the onset of the financial crisis 2008, the sovereign debt crisis in western economies and the new financial regulation with Basel III coming up, the financial industry faces the challenge of reinventing itself. The ring-fence for Commercial and Investment Banking, and new economic and regulatory capital requirements will determine the kinds of products banks will be able to distribute. It will have a huge impact in the Investment Banking business, which will suffer tough regulation and supervisory procedures. At the same time, credit risk models will be reviewed because they have failed to predict the crisis of 2008. The current financial and economic crisis doesn’t have any precedent in the past.

Basel III is a regulatory reform measures to improve the banking regulation, supervision and risk management. Basel III was published in 2009 and mainly because of widespread of credit crisis of global banking system. Therefore, the banks must maintain sufficient capital and proper leverage at any point in time. We also know that Basel III is implemented right after Basel I and II, its main changes are to enhance the stability of banking system when facing financial crisis and economic downturn. Apart from that, the content of banks’ risk management and transparency are also strengthened. The volatility of banking system can thus be reduced through strictly enforced Basel III standard and requirements.

“The new Basel III framework establishes higher liquidity requirements to ensure banks are better-equipped to absorb losses like those relating to the global financial crisis”. (Delimatsis & Panagiotis, 2012) Basel III promotes LCR (liquidity coverage ratio), ratio of high quality liquid assets(HQLA) to total net liquidity outflows over 30 days. Theoretically, banks whose LCR is more than 100 percent possess sufficient liquidity to withstand a month of elevated financial stress. (House, Sablik, & Walter, 2016)

The phased introduction of new banks in the private sector and expansion in the number of foreign banks provided for a new level of competition. Furthermore, increasingly tight capital adequacy norms, prudential and supervision norms were to apply equally across all banks, regardless of their ownership. [34]