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Global Bank Regulation: Principles and Policies

Book Description

Its focus on the prudential, global regulation of financial institutions drives this book's unique exploration of global policy principles.  Integrating theory, history, and policy debates, it provides a high-level, strategic treatment of the regulation of global banking.  With finely focused definitions and an intuitive scope, the authors pay particular attention to the international standards set by bodies such as the Basel Committe on Banking Supervision and the European Union. By beginning with the main justifications for the prudential regulation of banks and concluding in 2009, after regulators had proposed significant solutions to the crash, this lucid and engaging account of the principles, policies, and laws related to the regulation of international banking explains why and how governments work so hard on a convergence of rules and regulations.



  • Defines the over-arching policy principles of capital regulation
  • Explores main justifications for the prudent regulation of banks
  • Discusses the 2007-2009 financial crisis and the next generation of international standards of financial institution regulation
  • Examines tools for ensuring the adequate supervision of a firm that operates across all time zones
  • Table of Contents

    1. Cover image
    2. Title page
    3. Table of Contents
    4. Dedications
    5. Acknowledgments
    6. Copyright
    7. Introduction: The Global Financial System and the Problems of Regulation
      1. The Rationale for Regulation
      2. The Regulation of Financial Institutions and Markets
      3. The Case for International Regulation
      4. Who Sets the Standards?
      5. How to Use This Book
    8. Chapter 1. The Changing Nature of Banks
      1. Definitions
      2. Money, Credit Creation, and Fractional Reserve Banking
      3. Financial Innovation and the Changing Nature of Banks
      4. Three Distinctive Features of Modern Banking
      5. References
      6. Further Reading
    9. Chapter 2. Panics, Bank Runs, and Coordination Problems
      1. The Structure of Banks’ Balance Sheets
      2. Coordination Problems and Bank Runs
      3. Panic and Contagion in Modern Financial Systems
      4. Free Riders and Regulation
      5. References
      6. Further Reading
    10. Chapter 3. Collapsing Dominos and Asset Price Spirals
      1. Collapsing Dominos
      2. Asset Price Spirals
      3. The Global Financial Crisis of 2007–2009
      4. References
      5. Further Reading
    11. Chapter 4. The Financial Safety Net and Moral Hazard
      1. The Financial Safety Net
      2. Moral Hazard
      3. Is There an Alternative?
      4. References
      5. Further Reading
    12. Chapter 5. Sources of Financial Regulation
      1. National Laws
      2. International Law
      3. References
      4. Further Reading
    13. Chapter 6. Bank Licensing and Corporate Governance
      1. The Purpose of Bank Licensing
      2. The Fundamentals of Bank Licensing
      3. Fitness and Propriety of Bank Management
      4. Significant Changes in Ownership
      5. Choice of Bank Charter
      6. Cross-Border Issues
      7. Principles of Sound Corporate Governance
      8. Sarbanes-Oxley Act of 2002
      9. References
      10. Further Reading
    14. Chapter 7. Banks in Corporate Groups: Ownership and Affiliation
      1. Bank-Commerce Linkages
      2. The Separation of Banking and Finance
      3. Changes to Structural Regulation of the Combination of Banking and Other Financial Services
      4. References
      5. Further Reading
    15. Chapter 8. The Rationale for Bank Capital Regulation
      1. Why Regulate Bank Capital?
      2. Leverage Ratios
      3. Risk-Weighted Capital
      4. Criticisms of Basel I
      5. References
    16. Chapter 9. The New Capital Adequacy Framework: Basel II and Credit Risk
      1. The Standardized Approach
      2. The Internal Ratings-Based (IRB) Approaches
      3. Dealing with Financial Innovation
      4. References
      5. Further Reading
    17. Chapter 10. The New Capital Adequacy Framework: Basel II and Other Risks
      1. Market Risk
      2. Operational Risks
      3. Pillar 2 Risks
      4. References
      5. Further Reading
    18. Chapter 11. Direct Limits on Banks’ Risk Taking
      1. Credit Concentration Risk
      2. Liquidity Risk
      3. References
    19. Chapter 12. Consolidated Supervision and Financial Conglomerates
      1. What Is Consolidated Supervision?
      2. The Need for Consolidated Supervision
      3. Consolidated Supervision of Cross-Border Banks
      4. Financial Conglomerates
      5. References
    20. Chapter 13. Anti-Money Laundering
      1. What Is Money Laundering?
      2. The Impact on Banks
      3. International Response
      4. Banco Delta Asia Case Study
      5. References
      6. Further Reading
    21. Chapter 14. Bank Insolvency
      1. The Goals and Types of Bank Insolvency Regimes
      2. Legal Framework for Bank Insolvency
      3. Determination of Insolvency
      4. Administration Orders and Conservatorships
      5. Receivership
      6. References
      7. Further Reading
    22. Chapter 15. Institutional Structures of Regulation
      1. Institutional and Functional Regulation
      2. Rise of the Integrated Regulator
      3. Twin Peaks (Objectives) Approach
      4. Role of the Central Bank in Bank Supervision
      5. Evaluation of Structural Reforms
      6. References
      7. Further Reading
    23. Chapter 16. Regulation After the Global Financial Crisis
      1. The Causes of the Crisis
      2. Rethinking the Assumptions of Regulation
      3. New Directions in Capital Adequacy
      4. More Radical Options
      5. The International Dimension
      6. References
    24. Appendix. Introduction to Regulation and Market Failure
      1. Externalities
      2. Information Asymmetry
    25. Index