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Purpose: This chapter explores some of the difficult issues in financial regulation for financial stability. Noting the lack of prior academic work in the topic, this chapter presents a discussion of some difficult issues in financial regulation for financial stability.

Methodology: The chapter draws from real-world experiences in financial regulation and draws support from existing literature.

Findings and conclusions: Some of the difficult issues include: the difficulty in breaking too-big-to-fail financial institutions into small insignificant parts; the difficulty in regulating executive compensation in the financial sector without limiting the ability of financial institutions to offer competitive pay for executive talent; difficulty in instilling strict financial regulation and supervision without limiting the ability of financial institutions to exploit emerging profitable opportunities; difficulty in ensuring that financial institutions increase lending in bad times and during recessions; the rarity of having both a female CEO and Chair in a major financial institution; difficulty in making Central Banks independent from the Federal Government; difficulty in making financial institutions relevant in the midst of hostile technological innovation and disruption.

Practical implications: The implication of the findings is that financial regulation for financial stability is not an easy task. There will be issues that financial regulation can address, and there will be issues that financial regulation cannot address. Acknowledging that such difficulties exist on the path to financial stability is the first step to addressing these issues.

Climate change is emerging as an important issue increasing uncertainty in the business circle, and financial institutions through their inaction seem to be unmoved by climate change risk despite the potential for climate change events to affect the financial institutions and the financial system. In this chapter, the effect of climate change on financial institutions and the financial system are highlighted and discussed.

This chapter explores correspondences between the costs and benefits of financial and circus safety nets. The author stresses the idea that the character of a country's net cannot be static. It must adapt promptly to changes in the market, legal, bureaucratic, and ethical problems it is intended to alleviate.

Safety nets expand over time for two reasons. First, large firms whose operations lie formally outside the net have strong incentives to make themselves too difficult for authorities to fail and unwind in crisis circumstances. Second, in good times, safety-net managers underinvest in crisis planning. As a result, crisis-generated changes in the ordering of regulatory norms dispose them to rescue firms that are difficult to fail and unwind without holding themselves closely accountable for either the costs or the distributional effects of the subsidies the rescue engenders.

Internet + and Electronic Business in China is a comprehensive resource that provides insight and analysis into E-commerce in China and how it has revolutionized and continues to revolutionize business and society. Split into four distinct sections, the book first lays out the theoretical foundations and fundamental concepts of E-Business before moving on to look at internet+ innovation models and their applications in different industries such as agriculture, finance and commerce. The book then provides a comprehensive analysis of E-business platforms and their applications in China before finishing with four comprehensive case studies of major E-business projects, providing readers with successful examples of implementing E-Business entrepreneurship projects.

Internet + and Electronic Business in China is a comprehensive resource that provides insights and analysis into how E-commerce has revolutionized and continues to revolutionize business and society in China.

Deregulation and other factors permit and encourage financial institutions to become more integrated, both within their own (financial) industries, such as banking and insurance, and across these industries. Financial regulators have responded with like integration. As financial institutions increasingly compete with firms from other industries and areas, financial regulators similarly compete more across borders. The resulting competition in financial regulation enhances innovation, choice, and efficiency. The advent of home-run regulation, which in general allows financial institutions to adhere only to the financial regulations of their home area and is spreading across the US and Europe, may allow numerous regulatory regimes within a given market.

Purpose: This chapter discusses some policy options that central banks may find useful in dealing with climate change risk in the financial sector.

Methodology: This chapter uses discursive analysis to suggest policy options which central banks can use to deal with the risk of climate change in the financial sector.

Findings: Five policy options are proposed in the chapter, which includes: imposing a climate change capital surcharge; impose a fixed-rate risk capital – based on Tier 2 capital; a reduction in lending to industries whose activities destroy the environment and climate; creating a climate bank; and requiring financial institutions to relocate their important assets to areas less prone to climate change events.

Implication: Several policy experiments are needed to identify the best policy option that works best for each country while taking into account the unique financial sector, financial system, and climate change history of each country.

Originality: Central banks play an important role in regulating the financial sector and in managing its inherent risks, yet there are no studies that suggest policy solutions to help central banks and other financial sector regulators deal with the risk that climate change poses to the financial sector. This chapter suggests policy options that central banks can use to deal with the risk that climate change poses to the financial sector.

This chapter discusses the regulatory challenges faced by financial institutions in emerging countries and it presents their specific features compared to financial institutions in developed countries. It offers a practical way of implementing regulatory changes while accounting for emerging countries’ specific features. Using a principle-based approach, this chapter builds on the recent regulatory developments in both developed and developing market economies. It relates these developments to industry best practices as well as the current state of the art in risk management and corporate governance. The findings show how the regulation of financial institutions in emerging countries differs from that in developed countries. Different approaches to mitigate the divergences and fill the gaps are discussed. Both regulators and financial institutions in emerging countries will find this chapter offers a practical point of view based on field and industry experience on how to interpret and apply regulations and adopt best practices in risk management in a way that accounts for emerging countries’ specific features.

The area of law where the principle of transparency is applicable is expanding fast. Also many financial markets have recently become subject to new regulations requiring transparency, such as EU directives MIFID II or Solvency II. Here, what is expanding is not just the applicability of the principle as such, but also the scope of issues which are affected by transparency, that is, remuneration or conflict of interests. In the light of these regulations, it may seem that transparency has simply become a sole legislative measure assuring values such as consumer protection, market stability or – most of all – high-quality governance. Indeed, transparency is thought to contribute to the quality of governance in several different ways, although its implementation must meet certain standards if it is to produce the desired results, especially when it comes to financial institutions. Financial institutions are commonly required to be particularly transparent due to the fact they often act as public trust entities. As the activity of financial institutions is of such importance, the issue of transparency efficiency is worth discussing. Although it is said that the emergence of the principle of transparency in the EU law is a fairly new phenomenon, the existence of transparency obligation is not. Therefore, some doubts may arise as to the question whether the principle of transparency actually adds much to existing rules and principles. In this chapter the author explored and discussed how mandatory transparency affects financial institutions’ activity, and whether it performs its function efficiently.

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic resilience of three types of banks: fully fledged Islamic banks, purely conventional banks (CB), and CB with Islamic windows. The authors use the market-based systemic risk measures of marginal expected shortfall and systemic risk to identify which type is more vulnerable to a systemic event. The authors also use ΔCoVaR to identify which type contributes more to a systemic event. Using a sample of observations on 27 publicly traded banks operating over the 2005–2014 period, the authors find that CB is the least resilient sector to a systemic event, and is the one that has the highest contribution to systemic risk during crisis times.

Islamic financial institutions offer a different paradigm from conventional institutions. From corporate governance (CG) viewpoint, it embodies a number of interesting features since equity participation and profit-and-loss sharing arrangements form the basis of Islamic financing. These financial arrangements imply different stakeholder relationships and governance structures, and distinct from the conventional model since depositors have a direct financial stake in the bank's investment and equity participations. On top of that, the Islamic bank is subject to an additional layer of governance since the suitability of its investment and financing must be in strict conformity with Islamic law and the expectations of the Muslim community. Other form of governance such as accounting standards have also been an issue whether they have met the reporting requirement of Islamic financial institutions that carry title as “Islamic” as there is no uniformity. Therefore, there should be concerted efforts to revisit the existing good CG and accounting standards for Islamic financial institutions.