Search results

BCBS 239 sets out a challenging standard for risk data processing and reporting. Any bank striving to comply with the principles will be keen to introspect how risk data is organized and what execution capabilities are at their disposal. With this in mind, the current paper advises banks on the growing number of solutions, tools and techniques that can be used to support risk data management frameworks under BCBS 239.

This paper, based on a survey with 29 major financial institutions, including G-SIBs and D-SIBs from diversified geographical regions such as North America, Europe and APAC, aims to advise banks and other financial services firms on what is needed to become ready and compliant with BCBS 239. This paper discusses best practice solutions for master data management, data lineage and end user implementations.

The primary conclusion of this paper is that banks should not treat BCBS 239 as yet another compliance exercise. The BCBS 239 principles constitute a driving force to restore viability and improve risk governance. In light of the new standards, banks can benefit from making significant progress towards risk data management transformation. This report argues that banks need to invest in a solution that empowers those who use the data to manage risk data. Thus, operational complexities are lifted and no data operations team is needed for proprietary coding of the data. Only then banks will stay abreast of the competition, while becoming fully compliant with the BCBS 239 principles.

As noted by Prorokowski (2014), “Increasingly zero accountability, imposed, leveraged omnipresent vast endeavors, yielding ongoing understanding […] of the impact of the global financial crisis on the ways data should be treated” sparked off international debates addressing the need for an effective solution to risk data management and reporting.

This paper discusses the forthcoming regulatory change that will have a significant impact on the banking industry. The Basel Committee on Banking Supervision published its Principles for effective risk data aggregation and risk reporting (BCBS239) in January last year. The document contains 11 principles that Global Systemically Important Banks (G-SIBs) will need to comply with by January 2016. The BCBS 239 principles are regarded as the least known components of the new regulatory reforms. As it transpires, the principles require many banks to undertake a significant amount of technical work and investments in IT infrastructure. Furthermore, BCBS 239 urges financial services firms to review their definitions of the completeness of risk data.

The purpose of this paper is to aid understanding of the changes in Basel Committee on Banking Supervision (BCBS) regulatory strategies after the global financial crisis.

The author uses the credit valuation adjustment (CVA) charge reform as a test case for inquiring whether BCBS has departed from its pre-crisis facilitative regulatory strategy path. The regulatory strategy of the CVA charge is discussed.

The charge exhibits a new regulatory strategy that BCBS has adopted. It seeks to manipulate market structures by imposing risk-insensitive capital charge methodologies.

The paper offers a new heuristic to analyse regulatory initiatives and their significance. The CVA charge has not been subject to a regulatory theory-based analysis in prior literature.

The anti-money laundering (AML) frameworks of many countries were generally influenced by the international best practices of money laundering that were first established in 1988 through the Basel Committee on Banking Supervision (BCBS). The general belief is that these international best practices are applicable in all jurisdictions, although most countries are still affected by money laundering. The international best practices are universal measures that were developed as a yardstick to control and curb money laundering globally. Nonetheless, international best practices for money laundering are not tailor-made for specific jurisdictions and/or countries. Therefore, it remains the duty of respective jurisdictions and/or countries to develop their own context-sensitive AML measures in accordance with international best practices. An overview of the AML international best practices that were developed and adopted by several countries are analysed in this paper. These include customer due diligence measures established by the BCBS, the financial action task force (FATF) standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.

The article analyses the AML international best practices that were developed and adopted by several countries. These include customer due diligence measures established by the BCBS, the FATF standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.

It is hoped that policymakers and other relevant persons will use the recommendations provided in the paper to enhance the curbing of money laundering in financial institutions globally.

The paper does not provide empirical research.

The study is useful to all policymakers, lawyers, law students and regulatory bodies globally.

The study seeks to curb money laundering in the economy and society globally.

The study is original research on the use of AML/counter financing of terrorism international best practices to curb money laundering activities globally.

Introducing radical changes to the methodologies for the determination of capital requirements, the final stage of the Basel III standards, which is referred to as “Basel IV” by the industry, will be a significant challenge for the global banking sector. This article reviews the main components of the new framework, analyses its ongoing implementation in the European Union and discusses its potential impact on banks, putting forward policy recommendations.

This article uses primary sources such as the publications by the Basel Committee for Banking Supervision and the European Commission. It also reviews the secondary sources, including both academic articles and analyses by various stakeholders. However, this article does not undertake any empirical analysis.

This article discusses that Basel IV will introduce strategic, operational and regulatory challenges for banks in scope. It also identifies a number of areas which are subject to further debate in the European Union such as the enhanced due diligence requirements under the new credit risk framework; governance, reporting and control rules under the operational risk framework; exemptions for certain derivative transactions under the credit valuation adjustment framework and the level of application of the capital floors within banking groups. This article concludes that the global implementation of the reforms by all jurisdictions and transposition into national banking laws concurrently with the European Union in line with the Basel Committee's implementation timeline is important from a financial stability standpoint.

The article presents an up-to-date and comprehensive review of the practical implications of Basel IV standards. It analyses the implementation of the standards in the case of the European Union, reviews the potential policy implications and presents recommendations for risk management practitioners.

Key State Blue Cross and Blue Shield Plan (a disguised case of an actual BCBS Plan) is the merged product of three state plans. Initially burdened with a reputation of poor customer service, Key State's executives decided to invest heavily in service improvement, eventually achieving superior levels. Key State's high-quality customer service emerged as a true competitive advantage for its customers, who were primarily businesses and health benefits consultants who influenced corporate purchasers of health insurance. The Key State brand came to be synonymous with personal service, security, choice, and dependability. But the health care insurance market was changing under Key State's feet. Spiraling costs meant that high-quality service became less of a competitive advantage as employers were lured by low-cost, low-service providers. Many employers cut or dropped health care benefits entirely, swelling the ranks of the under- and uninsured, who in turn were extremely price-sensitive when shopping for health insurance on their own. Finally, the health care insurance market was being revolutionized by financial institutions willing to hold health benefit accounts and pay providers directly, thereby eliminating the need for Key State as a mediator. Key State executives were aware of these changes but were challenged by the mindset, culture, and organizational design custom-fit to their business accounts. The case asks the reader to consider whether Key State has the right number of target markets, whether it should have one brand or several for its different target markets, what it should do for the uninsured, and how it should improve its brand experience in light of the industry's changing landscape. All of these decisions will have significant implications for the organizational design of Key State.

To better understand the challenges involved in a successful health insurance company to cope with a rapidly changing and unpredictable environment; to formulate a new strategy and a new organizational design to accomplish this adaptation.

Cryptoassets have recently attracted the attention of national and international financial regulators. Since the mid-2010s blockchains have increasingly been adapted to automate and replace many aspects of financial intermediation, and by 2015 Ethereum had created the smart contract language that underpins the digitization of real assets as asset-backed tokens (ABTs). Those were initially issued by FinTech companies, but more recently banks active on international capital and financial markets, and even central banks, for example, the Bank of Thailand, have developed their own digital platforms and blockchains. A wide variety of real and financial assets underpins ABTs, viz., real-estate, art, corporate and sovereign bonds, and equity. Consequently, owing to the significant market capitalization of cryptocurrencies, the Basel Committee on Banking Supervision (BCBS) published two consultative papers delineating its approach on cryptoasset regulation. In this study, the authors analyze the mechanics of ABTs and their potential risks, relying on case studies of recent issuance of tokens in equity, real-estate, and debt markets, to highlight their main characteristics. The authors also investigate the consequences of the increasingly oligopolistic structure of blockchain mining pools and Bitcoin exchanges for the integrity and security of unregulated distributed ledgers. Finally, the authors analyze the BCBS’ regulatory proposals, and discuss the reaction of international financial institutions and cryptocurrency interest groups. The main findings are, firstly, that most ABTs are akin to asset-backed securities. Secondly, nearly all ABTs are “off-chain/on-chain,” that is, the underlying is a traditional asset that exists off-chain and is subsequently digitized. The main exception is the World Bank’s bond-i that is genuinely native to the blockchain created by the Commonwealth Bank of Australia, and has no existence outside it. Thirdly, all ABTs are issued on permissioned blockchains, where anti-money laundering/anti-terrorist funding and know-your-customer regulations are enforced. From a prudential regulatory perspective, ABTs do not appear to pose serious systemic risks to international financial markets. This may account for the often negative reactions of banks, banking associations, and cryptocurrency interest groups to the BCBS’ 2021 proposals for risk-weighted capital provisions for cryptoassets, which are viewed as excessive. Finally, we found that issuance of ABTS and other smart contracts on permissionless blockchains such as Bitcoin and Ethereum could potentially generate financial instability. A precedent involving Ethereum and The DAO in 2016 shows that (i) there is a significant accountability gap in permissionless blockchains, and (ii) the core developers of blockchains and smart contract technology, and Bitcoin mining pools, exercise an unexpectedly high- and completely unregulated-amount of power in what is supposedly a decentralized network.

The purpose of this paper is to readily bring to the fore, the vital dimension that the Bretton Woods Institutions, exemplified by both the International Monetary Fund (IMF) and the World Bank, has brought into the global economic template to dampen the momentum of corruption and money laundering through the impact of their activities in less developed countries (LDCs). The original mandate of the two institutions was to address the balance of payments and developmental issues of countries as a result of the devastating effects of the Second World War. However, this could not be achieved in an atmosphere engulfed with corruption and money laundering. As a result, it became necessary for them to intervene albeit through direct or indirect mechanisms demonstrated by the use of soft law bodies such as Basel Committee on Banking Supervisors (BCBS) and Financial Action Task Force (FATF).

This paper relies on primary legal documentations such as BCBS, FATF, articles of both IMF and World Bank to mention but a few in the analysis. The paper is doctrinal.

There is undoubtedly glaring indications that through the efforts of both IMF and the Bank, tremendous inroad has been made in LDCs in modulating the tempo of the malaise.

This paper is addressed to the authorities that are concerned about the scourge of the malaise and the impact to pay more attention to the mechanisms of soft laws used by the Bretton Woods Institutions to get their anti-corruption message through in LDCs.

This lies on the fact that the efforts of both IMF and the Bank have awakened the importance that should be attached to some soft laws in curtailing the issues.

The purpose of this paper is to assist the numerous regulators around the globe who are currently considering ways to impose domestic systemic importance-based capital requirements on banks.

The article discusses in some detail a number of issues from the viewpoint of regulatory practice, mentioning relevant literature where available. Comments partly reflect the experience that the Czech National Bank gathered over the past two years while preparing its own regime of domestic systemic importance-based capital requirements on banks.

The authors stress, among other points, one weakness of the (otherwise well-designed) method suggested by the Basel Committee for Banking Supervision (BCBS) for assessment of banks’ systemic importance: the method is “relative” in that it does not reflect the absolute importance of the banking sector for the economy. The paper also explains that in some cases, use of individual-level rather than consolidated-level data may be preferable, in contrast to what the BCBS guidance suggests. Further, implications of the buffers over a longer term are pointed out.

As far as the authors are aware, this article is the first to comprehensively discuss the main issues surrounding both key steps (systemic importance assessment and determination of buffer level) in the process of introducing buffers based on domestic systemic importance. A number of questions related to these two steps are raised which regulators may appreciate to be reminded of, even if some of the questions are such that it is not possible to give a generally applicable answer to them.

Purpose – To discuss, from the perspective of developing countries, recent proposals for reforming international standards for bank capital requirements.

Methodology/approach – After evaluating, from the viewpoint of developing countries, the effectiveness of capital requirements reforms and progress in implementing existing regulatory accords, the chapter discusses the procyclical effects of Basel regimes, and suggests a reform proposal.

Findings – Minimum bank capital requirements proposals in developing countries should be complemented by the adoption of an incremental, size-based leverage ratio.

Originality/value of chapter – This chapter contributes to enlarge the academic and policy debate related to bank capital regulation, with a particular focus on the situation of developing countries.

The purpose of this paper is to help directors, senior management, and stakeholders of Islamic banks understand sharī‘ah risk, a crucial consideration in the corporate governance of Islamic banks, and its impact on these banks.

This conceptual paper links dispersed insights drawn from the emerging body of sharī‘ah governance literature, and the guidance issued by the Basel Committee on Banking Supervision (BCBS), the Islamic Financial Services Board (IFSB), and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) with new insights to clarify the sharī‘ah risk that Islamic banks face.

Sharī‘ah risk, an operational risk, poses a credible hazard to Islamic banks and their stakeholders. Possible consequences of sharī‘ah non-compliance include higher costs, financial losses, liquidity problems, bank runs, bank failure, industry smearing and financial instability. This study defines shariah risk, identifies credit, legal, compliance, market, and reputational risk that it may evoke, and categorizes its causes and events.

Future research could empirically test the ideas posited. In this paper claims were substantiated by logic and examples.

The study devises an instrument for assessing sharī‘ah risk, and suggests measures for directors, senior management, and regulators to mitigate this risk.

This is the first study to focus on the implications of sharī‘ah risk, delineate examples of events and incorporate them within the BCBS operational risk causes, and develop a tool for measuring sharī‘ah risk.