Effective bank regulation: seven guiding principles
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 31 March 2020
Issue publication date: 1 May 2020
Abstract
Purpose
This paper is a “viewpoint” article, and as such, the purpose of this paper is to present the author’s opinion and interpretation. Its primary purpose is to propose seven guiding principles for effective bank regulation so that these may be subject to academic criticism.
Design/methodology/approach
The principal theme of this paper has its origins in archival research into the nature of bank regulation in the UK in 25 to 30 years after the Second World War. This paper draws upon insights gained into the nature of bank regulation in the UK arising from that research. It focuses on what aspects of bank regulation were effective in that earlier period. It then attempts to convert those insights into underlying principles.
Findings
Seven principles are proposed as the starting point for a discussion as to the principles that should underpin effective bank regulation. The seven principles are set out in the introduction to the paper.
Originality/value
The framework for the regulation of banks in the UK and in many other countries is a complex one. The general trend in bank regulation in the UK in the past four decades has been technocratic, characterised by a preference for codified rules, which are often detailed and technically complex. It has also been characterised by the establishment, or further development, of intricate regulatory and supervisory structures at national, international and supranational levels. Scholarly attention has understandably been focused on those trends. Rather less attention has been given to the broader principles that might underpin and guide bank regulation. This paper seeks to contribute to that question.
Keywords
Acknowledgements
The author would like to thank Springer Nature Switzerland AG for permission to re-use excerpts from: Linda Arch, The Regulation of the London Clearing Banks, 1946-1971: Stability and Compliance, 2018, Palgrave Macmillan, reproduced with permission of Springer Nature Switzerland AG. A longer version of the argument made in the section titled “Trust and trustworthiness” was made in: Linda Arch (Spring 2019) “‘Our distrust is very expensive’: How do we restore trust in banks?” IPPR Progressive Review, Vol. 25 No. 4, pp. 435-443: © 2019 The Author/s. IPPR Progressive Review © 2019 IPPR. The author thanks Wiley for permission to draw upon the argument in that article and to re-use excerpts from it. The general argument in this article has its origins in: Linda Arch, “Chapter Six: Bank Regulation Today,” in London Clearing Banking, 1946-1979: Stability and Compliance and Its Regulatory, Competition and Institutional Underpinnings, PhD Thesis, Henley Business School, University of Reading, 2017.
The author is very grateful to Professor John Ashton and an anonymous reviewer for their comments on the article.
Citation
Arch, L. (2020), "Effective bank regulation: seven guiding principles", Journal of Financial Regulation and Compliance, Vol. 28 No. 2, pp. 301-314. https://doi.org/10.1108/JFRC-06-2019-0075
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited