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International Finance Regulation: The Quest for Financial Stability

Book Description

As the global market expands, the need for international regulation becomes urgent

Since World War II, financial crises have been the result of macroeconomic instability until the fatidic week end of September 15 2008, when Lehman Brothers filed for bankruptcy. The financial system had become the source of its own instability through a combination of greed, lousy underwriting, fake ratings and regulatory negligence. From that date, governments tried to put together a new regulatory framework that would avoid using taxpayer money for bailout of banks. In an uncoordinated effort, they produced a series of vertical regulations that are disconnected from one another. That will not be sufficient to stop finance from being instable and the need for international and horizontal regulation is urgent. This challenge is the focus of Georges Ugeux's book.

International Finance Regulation: The Quest for Financial Stability focuses on the inspirations behind regulation, and examines the risks and consequences of fragmentation on a global scale. Author Georges Ugeux has four decades of experience in the legal and economic aspects of international business operations. He created and run the New York Stock Exchange'sinternational group in charge of developing the NYSE's reach to non-US companies, including relationships with regulators and governments. Ugeux teaches European Banking and Finance of the Columbia University School of Law. Ugeux is uniquely positioned to provide recommendations and suggestions from the perspective of a top global authority. In the book, he explores international regulation with topics such as:

  • Laws, regulations, and risks of overregulation

  • Transformation of the U.S. market and creation of the Eurozone

  • Development of a global framework and stability of the banking system

  • In-depth examination of Basel III, the Dodd-Frank Act, the European Banking Union, and the Volcker Rule

  • The book also contains case studies from real-world scenarios like Lehman, CDS, Greece, the London Whale, and Libor to illustrate the concepts presented. Finance consistently operates within an increasingly global paradigm, and an overarching regulation scheme is becoming more and more necessary for sustainable growth. International Finance Regulation: The Quest for Financial Stability presents an argument for collaboration toward a comprehensive global regulation strategy.

    Table of Contents

    1. Preface
      1. Is Finance in a Stage of Permanent Crisis?
      2. Global Markets Are Interconnected
      3. Regulating Finance in a World in Crisis
      4. A Web of Institutional Complexity
      5. Will Global Financial Regulation Become Lex America?
      6. Applying Global Regulatory Convergence
      7. Regulator and Regulated: The Infernal Couple
      8. Finance Cannot Be Left Unregulated
      9. Five Years after Lehman, Regulation Could Not Change the Culture
      10. A Culture of Outlaws
      11. I Will Never Give Up
      12. Notes
    2. CHAPTER 1 The Multiple Objectives of Financial Regulation
      1. Stop (Ab)using Taxpayer Money
      2. Protect Retail and Small Investors and Depositors
      3. Ensure Transparency of Markets and Institutions
      4. Implement a Truly Risk-Adjusted Remuneration System
      5. Protect Deposits from Trading
      6. Notes
    3. CHAPTER 2 A Quarter Century of Banking Crises and the Evolution of Financial Institutions
      1. Banking Crises Are Not Exactly a Recent Phenomenon
      2. The Two Main Emerging-Market Crises
      3. Subprime Crisis
      4. Lehman Crisis
      5. European Sovereign Debt Crisis
      6. European Banking Crisis
      7. LIBOR Manipulation
      8. Will the Foreign Exchange Market Be Next?
      9. Notes
    4. CHAPTER 3 The Lessons of the Recent Financial Crises: The Explosion of Balance Sheets
      1. Structural Overbanking of Europe
      2. Lack of Transparency of the Derivative Markets
      3. Emergence of the Credit Default Swap (CDS) Market
      4. The Regulatory Landscape Is Not Global but Largely National
      5. Notes
    5. CHAPTER 4 Global Financial Regulation: The Institutional Complexities
      1. Group of 20 (G20)
      2. Financial Stability Board (FSB)
      3. Bank for International Settlements (BIS) and the Basel Committee (BCBS)
      4. International Monetary Fund (IMF)
      5. International Organization of Securities Commissions (IOSCO)
      6. International Accounting StandardS Board (IASB)
      7. International Association of Insurance Supervisors (IAIS)
      8. Notes
    6. CHAPTER 5 Capital Adequacy, Liquidity, and Leverage Ratios: Sailing toward the Basel III Rules
      1. Part I: Capital Adequacy
      2. Part II: Liquidity
      3. Part III: Leverage
      4. Notes
    7. CHAPTER 6 Assessing Likely Impacts of Regulation on the Real Economy
      1. Notes
    8. CHAPTER 7 Regulating the Derivatives Market
      1. Origin of the Derivatives Market
      2. Size of the Derivatives Markets
      3. U.S. Regulation: Dodd-Frank Act
      4. European Market Infrastructure Regulation (EMIR)
      5. Transatlantic Divergences
      6. Short Selling Is a Form of Derivative
      7. JPMorgan Chase London Trading Losses
      8. Notes
    9. CHAPTER 8 The Structure of Banking: How Many Degrees of Separation?
      1. Systemically Important Financial Institutions (SIFIs)
      2. Universal Banking Model
      3. Separation Models
      4. United Kingdom
      5. United States
      6. European Union
      7. Sw+itzerland
      8. Volcker Rule and Proprietary Trading
      9. Too Big to Fail (TBTF): Is Size the Problem?
      10. Prohibit the Trading of Commodities by Banks
      11. Notes
    10. CHAPTER 9 Banking Resolution and Recovery
      1. Moral Hazard
      2. Can the Bail-In Concept Avoid Taxpayers’ Bailout?
      3. Lessons from the Financial Crisis
      4. Living Will, or How Banks Want to Be Treated if They Are Close to Collapsing
      5. United States
      6. The Citi Recovery Plan
      7. Role of the Federal Deposit Insurance Corporation in the United States
      8. United Kingdom
      9. European Banking Resolution and Recovery Directive
      10. Regulatory Technical Standards
      11. Can Resolution Rules Be Effective?
      12. An Impossible European Institutional Challenge
      13. Who Will Decide to Put Companies Under Resolution Surveillance?
      14. Notes
    11. CHAPTER 10 Banking and Shadow Banking
      1. Hedge Funds
      2. United States
      3. Europe
      4. Other Types of Shadow Banking
      5. Capital Markets and Securitization
      6. Notes
    12. CHAPTER 11 Rating Agencies and Auditors
      1. Part I: The Rating Agencies
      2. Part II: External Auditors
      3. Part III: The Limits of Accountability
      4. Notes
    13. CHAPTER 12 Central Banks as Lenders of Last Resort Have a Conflict of Interest with Their Regulatory Role
      1. Financial Stability
      2. United States: Quantitative Easing
      3. European Central Bank: The Long-Term Refinancing Operations (LTROs)
      4. United Kingdom
      5. Japan and Abenomics
      6. Are Central Bank Balance Sheets Eternally Expandable? Have They Become Hedge Funds?
      7. Is This Novation of Central Banks Legitimate or Legal?
      8. Notes
    14. CHAPTER 13 Financial Institution Governance (or Lack Thereof)
      1. Risk Management
      2. Dysfunctional Boards of Directors
      3. Should the Chairperson Also Be the CEO?
      4. Remuneration and Risks
      5. Personal or Institutional Accountability
      6. Notes
    15. CHAPTER 14 Was It a Global Crisis? The Asian Perspective
      1. Japan
      2. China
      3. India
      4. Assessing the Asian Risk
      5. Notes
    16. CHAPTER 15 The Challenges of Global Regulation
      1. Regulation, Policies, and Politics
      2. Regulators and Sovereign Financing
      3. European Central Bank Supervision: The E.U. Governance Challenges
      4. The Risks of Regulatory Fragmentation
      5. Bank Resolution: The Legal Nightmare
      6. Basel III
      7. Reemergence of Capital Markets
      8. Restructuring Finance
      9. Should Financial Communication Be Regulated?
      10. Should Financial Media Respect a Code of Conduct?
      11. Financial Education Is Key
      12. Notes
    17. CHAPTER 16 Regulation and Ethics
      1. Management Integrity
      2. Accountability
      3. Transparency Is Key
      4. A Principled Regulatory System Is Needed
      5. Doing the Right Thing
      6. Notes
    18. Conclusion What Can We Expect?
    19. A Few Books I Read and Found Helpful . . .
      1. The Actors
      2. The Classics
      3. The Academics
      4. The Reporters
      5. The Ultimate Manual
    20. About the Author
    21. Index
    22. End User License Agreement