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Article

Olivia Anku-Tsede

This study aims to seek to fill a gap in regulatory impact assessment in developing countries by presenting an analysis of how formal regulation impact on the efficiency…

Abstract

Purpose

This study aims to seek to fill a gap in regulatory impact assessment in developing countries by presenting an analysis of how formal regulation impact on the efficiency and productivity of financial non-governmental organisations (FNGOs) in Ghana. Much has been written about the formal financial sector, but very little is known about the lower end of microfinance and the impact of formal prudential regulation on FNGOs providing microfinance services. The Bank of Ghana (BOG), nevertheless, in the year 2011, extended formal prudential regulation to FNGOs without any empirical basis. This study uses regulatory theories and empirical evidence to aid in the evaluation of whether formal prudential regulation is appropriate for FNGOs operating within the microfinance sector.

Design/methodology/approach

Empirical evidence derived from FNGOs, regulatory agents, consumers and financial lawyers within the Greater Accra and Ashanti Regions of Ghana served as the basis of the analysis in this study. Descriptive statistics, frequency counts and percentage scores, were used to analyse the data collected.

Findings

The existing structures of FNGOs in Ghana are unsuitable for formal prudential regulation. The BOG does not have adequate staffing and funding to supervise and monitor the microfinance activities of FNGOs. Formal prudential regulation could impede growth and efficient delivery of microfinance services.

Research limitations/implications

The BOG is the only regulatory agency responsible for regulating the financial market in Ghana, thus access to officers with knowledge in the regulatory regime was very limited.

Practical implications

The study revealed in depth information about FNGOs, microfinance and the impact of formal prudential regulation on FNGOs.

Originality/value

The study is the first to use empirical studies and theories of regulation to assess the impact of extending formal prudential regulation to FNGOs in Ghana. Data from the regulator, the regulated and consumers, the key players in any regulatory process, served as the basis of the analysis in the study resulting in the unravelling of in-depth information on the regulation of FNGOs.

Details

International Journal of Law and Management, vol. 56 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

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Article

Jean-Baptiste Gossé and Dominique Plihon

This article aims to provide insight into the future of financial markets and regulation in order to define what would be the best strategy for Europe.

Abstract

Purpose

This article aims to provide insight into the future of financial markets and regulation in order to define what would be the best strategy for Europe.

Design/methodology/approach

First the authors define the potential changes in financial markets and then the tools available for the regulator to tame them. Finally, they build five scenarios according to the main evolutions observed on the financial markets and on the tools used by the regulator to modify these trends.

Findings

Among the five scenarios defined, two present highly unstable features since the regulator refuses to choose between financial opening and independently determining how to regulate finance in order to preserve financial stability. Three of them achieve financial stability. However, they are more or less efficient or feasible. In terms of market efficiency, the multi-polar scenario is the best and the fragmentation scenario is the worst, since gains of integration depend on the size of the new capital market. Regarding sovereignty of regulation, fragmentation is the best scenario and the multi-polar scenario is the worst, because it necessitates coordination at the global level which implies moving further away from respective national preferences. However, the more realistic option seems to be the regionalisation scenario: this level of coordination seems much more realistic than the global one; the market should be of sufficient size to enjoy substantial benefits of integration. Nevertheless, the “European government” might gradually increase the degree of financial integration outside Europe in line with the degree of cooperation with the rest of the world.

Originality/value

Foresight studies on financial markets and regulation are quite rare. This may be explained by the difficulty to forecast what will be their evolution in the coming decades, not least because finance is fundamentally unstable. This paper provides a framework to consider what could be the best strategy of regulators in such an unstable environment.

Details

Foresight, vol. 16 no. 2
Type: Research Article
ISSN: 1463-6689

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Article

Jaffar Mohammed Ahmed

The purpose of this paper is to describe a theoretical model for banking regulation in relation to Basel accords implementation. As a risk manager practitioner at a…

Abstract

Purpose

The purpose of this paper is to describe a theoretical model for banking regulation in relation to Basel accords implementation. As a risk manager practitioner at a financial institution and in-charge of Basel implementation in a Basel accords environment of banking regulation, the author has been intrigued by the theoretical basis of the design of Basel accords. The objective was to investigate a theoretical model in the literature according to which the accords were designed. In case of deficiency in the literature of this model, the author seeks to provide a juxtaposition to the theoretical model that explains the accords adoption and implementation by regulators.

Design/methodology/approach

This paper presents a review of existing literature.

Findings

After reviewing of public interest theory, cultural theory, administration theory and the new-institutionalism theory, the author found little application of these theories to the capital-based regulation, particularly in relation to Basel 2 accord. There is deficiency in the literature of a conceptual theoretical framework based on which the author can explain the adoption of Basel accords. The author has provided a theoretical model that links these theories to the practice of banking regulation. This paper found deficiencies in theories of how banks should be regulated as compared to several theories that explains why banks are regulated.

Originality/value

After reviewing of public interest theory, cultural theory, administration theory and the new-institutionalism theory, the author found little application of these theories to the capital-based regulation, particularly in relation to Basel 2 accord. There is deficiency in the literature of a conceptual theoretical framework based on which the author can explain the adoption of Basel accords. The author has provided a theoretical model that links these theories to the practice of banking regulation. This paper found deficiencies in theories of how banks should be regulated as compared to several theories that explains why banks are regulated.

Details

Journal of Financial Regulation and Compliance, vol. 24 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

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Article

Brandon Becker, Elizabeth K. Derbes, Russell J. Bruemmer, Franca Harris Gutierrez and Martin E. Lybecker

The purpose of this paper is to summarize and provide commentary on the US Department of Treasury's Blueprint for a Modernized Financial Regulatory Structure, issued on…

Abstract

Purpose

The purpose of this paper is to summarize and provide commentary on the US Department of Treasury's Blueprint for a Modernized Financial Regulatory Structure, issued on March 31, 2008.

Design/methodology/approach

The paper summarizes and comments on the short‐, intermediate‐, and long‐term recommendations laid out in the Blueprint. The short‐term recommendations are to modernize the President's Working Group on Financial Markets, principally by broadening its focus to include the entire financial sector; to address gaps in mortgage origination oversight, principally though creating a federal Mortgage Origination Commission; and to enhance the Federal Reserve Board's current temporary liquidity provisioning process. The Treasury's intermediate‐term recommendations are intended to modernize the regulatory structure and to eliminate duplication. They are to phase out and transition the thrift charter to the national banking charter; to merge the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC); to establish a uniform, comprehensive regulatory system for, and create a federal charter for, “systemically important” payment and settlement systems; and to create an optional federal charter for insurers. The Blueprint's long‐term optimal regulatory structure envisions an “objectives‐based” regulatory approach in which three primary regulators would be established to focus individually on market stability regulation, prudential financial regulation and business conduct; three types of charters for financial institutions: federal insured depository institutions, federal insurance institutions, and federal financial services providers; the Federal Reserve Board assuming the role of market stability regulator; a prudential federal regulatory agency to regulate financial institutions with some type of explicit government guarantee associated with their business operations; and a conduct‐of‐business regulatory agency to regulate the business conduct of all financial institutions. In addition to the three objectives‐based regulators, the Blueprint recommends establishing two other regulatory entities: a federal insurance guarantee corporation and a corporate finance regulator.

Findings

The Blueprint finds that substantial regulatory reform is necessary to respond to significant developments including globalization of the capital markets, innovative and sophisticated new financial products and trading strategies, growing institutionalization of the capital markets, and convergence of financial service providers and financial products. Among the areas where one may see action and debate in the near future are: broadening the scope and membership of the President's Working Group on Capital Markets, adoption of uniform minimum licensing standards and the creation of a mortgage origination commission, further discussion of the terms and conditions attached to non‐depository institutions' access to the Federal Reserve discount window, continuing debate around the possible merger of the SEC and the CFTC, and updating by the SEC of the self‐regulatory organization (SRO) rule‐making process.

Originality/value

The paper is a clear and concise summary with commentary from expert securities lawyers.

Details

Journal of Investment Compliance, vol. 9 no. 3
Type: Research Article
ISSN: 1528-5812

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Article

Joanne Hindle

The purpose of this paper is to analyse the regulatory and other responses to the recent credit crisis with particular emphasis upon likely regulatory reform.

Abstract

Purpose

The purpose of this paper is to analyse the regulatory and other responses to the recent credit crisis with particular emphasis upon likely regulatory reform.

Design/methodology/approach

The paper is based upon an analysis of recent papers, speeches and articles to draw together common themes for regulatory reform across the European Union (EU). It pays particular attention to two key papers, that from the Chairman of the UK Financial Services Authority (The Turner Report) and from the senior EU Group, the de Larosiere Report.

Findings

It is suggested that some nine or ten common themes emerge for regulatory reform from the many authoritative writings on the subject and that the timeframe for change is very likely to be much shorter that is the norm for international action. However, some areas of debate are noted, for example, how the role of national vs international regulators is to be resolved.

Practical implications

All regulated financial services firms, whether banks or not, should expect a far higher level of regulatory intervention and with change occurring more quickly that would normally be expected.

Originality/value

In pulling together and analysing most of what has been written to date on the topic of regulatory reform the paper gives a unique overview of likely future developments. By identifying common themes it shows regulated firms the areas where more intervention is most likely to occur and highlights the timescale for that.

Details

Journal of Financial Regulation and Compliance, vol. 17 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

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Article

Samuel Munzele Maimbo

This paper describes the problems of bank regulation and supervision found in Tanzania, Uganda and Zambia, highlighting the institutional weaknesses facing bank…

Abstract

This paper describes the problems of bank regulation and supervision found in Tanzania, Uganda and Zambia, highlighting the institutional weaknesses facing bank regulators. It also reviews the recent banking regulation and supervision reforms designed to strengthen the regulatory and supervisory capacity of the central bank in all three countries and discusses the efficacy of the reforms in mitigating financial distress. It concludes that, while significant strides have been taken in all three countries, there is an important aspect of these reforms that needs to be addressed — the practical problem of differentiating between appropriate and inappropriate regulations for developing economies.

Details

Journal of Financial Regulation and Compliance, vol. 8 no. 4
Type: Research Article
ISSN: 1358-1988

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Article

Christopher P. Buttigieg

The purpose of this paper is to review the development of the Capital Requirements Directive (CRD) and examine the manner in which this has been implemented for investment…

Abstract

Purpose

The purpose of this paper is to review the development of the Capital Requirements Directive (CRD) and examine the manner in which this has been implemented for investment firms in Malta. The paper also assesses the challenges that small and medium‐sized investment firms may face as a consequence of the proposed CRD IV, which seeks to safeguard the stability of the European banking sector.

Design/methodology/approach

A literature review of relevant EU and Malta legislation and policy documents has been carried out. The arguments made in the paper are the result of the author's reflections on the subject and discussions held with other policy experts on capital adequacy in Malta and the UK.

Findings

The paper considers the CRD from the perspective of small and medium‐sized investment firms and sheds light on the challenges faced by Malta with regards to the implementation of the CRD for these type of firms. It also examines the approach taken by the Malta Financial Services Authority in order to address these challenges.

Originality/value

Possible future challenges that might arise in view of CRD IV are also considered. It is a central argument of this paper that capturing investment firms, particularly small and medium‐sized firms, within the scope of regulation, the main purpose of which is to address systemic risk, may result in over‐regulation.

Details

Journal of Financial Regulation and Compliance, vol. 20 no. 4
Type: Research Article
ISSN: 1358-1988

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Article

Anne Abraham, Hemant Deo and Helen Irvine

This paper aims to focus on a number of unexpected disclosures by major Australian banks, to highlight the subjectivity of financial reports and their failure to present…

Abstract

Purpose

This paper aims to focus on a number of unexpected disclosures by major Australian banks, to highlight the subjectivity of financial reports and their failure to present an accurate portrayal of the underlying realities, and to propose that corporate governance disclosures are required to provide reassurance that financial reports are trustworthy.

Design/methodology/approach

Mouck's institutional framework of financial regulation portrays financial reporting as a “game” played within a set of rules. It provides insights about the subjectivity of financial reports which are illustrated with archival evidence from banks' reports and activities.

Findings

The banks' financial reports were shown, in the light of later revelations, to portray an unrealistic view of their operations. Disclosures about corporate governance practices play a strong legitimising role, enhancing perceptions that financial reports correspond with organisational realities.

Research limitations/implications

This study considers a narrow population of companies within one industry. By extending the focus, greater evidence could be provided that accounting standards and financial reporting requirements have lost their connection with business practices.

Practical implications

In spite of financial reporting reforms, financial reports are becoming less reflective of companies' activities and performance. This questions the usefulness of accounting standards, and the effectiveness of regulatory systems. Future reforms to accounting standards need to address these issues.

Originality/value

The paper demonstrates the contention that the financial reports of several Australian banks fail to match the realities that lie beneath is really a broader challenge to the usefulness and credibility of Australia's system of financial reporting and regulation.

Details

Asian Review of Accounting, vol. 16 no. 1
Type: Research Article
ISSN: 1321-7348

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Article

Saptarshi Ghosh and Swetketu Patnaik

The Independent Banking Commission (Vickers) Report is not only one of the most significant developments in the banking regulatory and supervisory context in the UK in…

Abstract

Purpose

The Independent Banking Commission (Vickers) Report is not only one of the most significant developments in the banking regulatory and supervisory context in the UK in recent times but is also one that would considerably impact banking and capital markets functions and trends in this decade. The purposes of this paper are two‐fold: to analyse the interim Vickers Report within the larger paradigm of the prudential banking regulatory approach in the UK, particularly in the context of the debate of bailing out banks that are too‐big‐to‐fail; and to critically examine the recommendation of the Report in the context of the failure of Northern Rock in 2007. The central focus of the paper is to analyse the probable impact and shortcomings of the key recommendation of the Vickers Report, i.e. requirement to hold an additional capital buffer in order to separately ring‐fence retail functions and retail deposits of universal banks and financial institutions operating in the UK.

Design/methodology/approach

The method used is a combination of legal examination and case‐study based analysis. This paper sees the failure of Northern Rock as essentially a consequence of supervisory lapses by the FSA and raises relevant critical questions as to the efficacy of the recommendation of the Vickers Report in the context of such supervisory lapses and failures. While relying primarily on official publications in the public domain, journal articles, academic writings, and, newspaper articles, this paper explores the related regulatory and financial implications of the Vickers Report recommendation in the backdrop of the banking crisis in the UK.

Findings

The paper concludes that the key recommendation of the Vickers Report, to ring‐fence retail functions universal banks operating in the UK, goes only mid‐way in securing the twin objectives of stability and safety that the Report has set out to achieve.

Research limitations/implications

The present Report is an interim one and the final version of the Report is expected in September. Further, various oversight reports and recommendations by the FSA and other bodies are expected as a follow‐up to the final Report. The key recommendation of the requirement for universal banks operating in the UK to hold additional capital for ring‐fencing their retail functions and deposits is not expected to undergo any substantial modification or revision in the final Report.

Originality/value

This paper is of immense significance to bankers, supervisors, lawyers, auditors, consultants, researchers, jurists, and, those engaged in or with various issues and sectors in financial and banking regulation.

Details

International Journal of Law and Management, vol. 54 no. 2
Type: Research Article
ISSN: 1754-243X

Keywords

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Article

Kenneth Kaoma Mwenda and Gerry Nkombo Muuka

Micro‐finance institutions are critical to Africa's quest for solutions to the continent's development challenge. The area of their greatest potential impact, rural…

Abstract

Micro‐finance institutions are critical to Africa's quest for solutions to the continent's development challenge. The area of their greatest potential impact, rural Africa, is not only home to the bulk of the continent's population, but also the vast majority of Africa's poor. This paper not only defines MFIs with examples from Zambia, South Africa, Mali and Zimbabwe, it also establishes a clear link between MFIs and both poverty eradication and the empowerment and equality of women, two of the major Millennium Development Goals. The paper concludes with some policy recommendations and a set of “best practices” for the future success of MFIs on the continent, including the need to ensure flexibility and careful government regulation and supervision of MFIs.

Details

International Journal of Social Economics, vol. 31 no. 1/2
Type: Research Article
ISSN: 0306-8293

Keywords

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