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Introduction: The COVID-19 crisis is a major shock to the global economy, with serious repercussions on financial markets. Most economies, especially high-income ones, have made considerable efforts, including financial ones, to stimulate aggregate demand in the face of a loss of income on the one hand and to maintain the production potential of companies on the other. This fact required the intervention through various instruments on the money market, but also the mention of the money creation capacity of the banks through the lending mechanism. Apparently, this should have affected the stability of banking systems by increasing the credit risk assumed, but this was avoided because banks are better capitalised and the regulatory framework, including the macroprudential one, was strengthened after the financial crisis of 2007–2009. Therefore, the national authorities had sufficient leeway to respond to the recession and market instability caused by the pandemic by relaxing prudential requirements.

Aim: A theoretical review of literature and good practice of developed banking systems on how macroprudential policy can supplement expansionary monetary policy in overcoming the pandemic crisis. Identifying the risks for the excessive use of relaxed macroprudentialism and formalising recommendations to combine it with monetary policy instruments to overcome stressful situations for banking systems.

Method: In order to study the subject approached in this chapter, there were applied the following research methods, such as analysis and synthesis of conceptual approaches of macroprudentiality and the tools they use, deduction and induction, in order to elucidate the influencing factors using the relaxation of macroprudentiality in the context of pandemic crisis and research on the high-income states experience in order to formulate conclusions and opinions.

Findings: The authors find that countries have responded quickly to the outbreak of the crisis by easing capital and liquidity requirements, or at least refraining from the previously planned tightening. At the same time, the authors noticed that loan-based measures and minimum reserve requirements were rarely relaxed and risk weights were not changed at all.

Originality of the Study: The correlation of different monetary and macroprudential policy instruments in the need to relax them, the analysis of possible risks and the formulation of conclusions on the usefulness of applying these methods to solve the economic effects of the COVID-19 pandemic.

Implications: Our results suggest that the macroprudential instruments can only be applied if banking systems have previously succeeded in consolidating the capitalisation of banks. A restrictive macroprudential policy can create premises for the use of excess capital in situations such as that generated by the pandemic, but it is recommended only to economies where overregulation does not affect development in periods of normal evolution.

This paper reassesses the center-periphery relationship in light of recent developments in the international monetary system and the currency hierarchy in a geopolitical economy framework. The center-periphery relationship has historically been examined in relation to the international division of labor, the pace and diffusion of technical progress associated with it, and the pattern of consumption it embodies. As conceived by structuralists and dependentistas, it is not seen as the result of the uneven and combined development of capitalism: it does not take into account the struggle between the dominant States (center), which want to reproduce the current order and the contender States (periphery) which aim to accelerate capitalist development to reduce the unevenness, and even to undermine the imperial project of dominant states. In a geopolitical economy framework, a powerful obstacle peripheral countries face in their efforts at combined development is the international monetary system, something that the theorists of the center-periphery relationship have perhaps overlooked. Because of its subordinate position in the currency hierarchy, the periphery is subject to greater external vulnerability, greater instability of exchange and interest rates, and as a result, enjoys a more restricted policy space. In this sense, the chapter shows that, beyond macroeconomic policies, the currency hierarchy in a context of high capital mobility limits a range of developmental policies of peripheral countries, reinforcing the unevenness of world economy and constraining combined development.

This chapter presents the hetrodox theory of Islamic finance in regard to the theme of corporate governance in the light of the particular Islamic epistemological premise. A vast social implication of corporate governance is opened by its epistemological inquiry comprehending integrated decision making and systemic complementarities expending across society at large. Thereby, a socio-financial theory of corporate governance in the epistemological context is elaborated upon. This is a path-breaking chapter premised on its epistemological approach of unity of knowledge and learning systems as a distinct contribution to the theory of corporate governance in the field of ethical socio-financial perspective.

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.

This chapter aims to examine Bank Negara Malaysia’s (BNM) approach in fulfilling its financial consumer protection mandate from unfair contract terms and the statutory framework relevant for consumer protection in the domestic market. This is a qualitative-based research. Using content analysis, this study analyses BNM’s Financial Stability and Payment Systems Report from 2012 to 2016, specifically on the ‘market conduct and consumer empowerment’ to explore BNM’s prudential regulatory, supervisory and consumer protection roles in protecting bank consumers from unfair contract terms. It is found that even if a number of standards and guidelines have been issued by BNM in improving ‘fairness and transparency’, the potential risk facing bank consumers from unfair terms in standard consumer contracts of Islamic banks especially where terms may be unfair or unclear remains unchanged. This study recommends that BNM as the Central Bank and financial regulator of Malaysia promotes self-regulation of the Islamic banks by adopting value-based banking of a consumer-focussed culture in delivering an effective protection for consumers from unfair contract terms and empowering them in their dealings with Islamic banks in Malaysia. This study will be helpful in bringing a policy formulation by BNM in identifying their weak areas and suggesting improvements in pursuing a strong consumer protection agenda from unfair contract terms.

Cryptocurrency arose, and grew in popularity, following the financial crisis of 2008 built upon a promise of decentralizing money and payments. An examination of the history of money and banking in the United States demonstrates that stable money benefits from strict controls and commitments by a centralized government through chartering restrictions and a broad safety net, rather than decentralization. In addition, financial crises happen when the government allows money creation to occur outside of official channels. The US central bank is then forced into a policy of supporting a range of money-like assets in order to maintain a grip on monetary policy and some semblance of financial stability.

In addition, this chapter argues that cryptocurrency as a form of shadow money shares many of the problematic attributes of both the privately issued bank notes that created instability during the “free banking” era and the “shadow banking” activities that contributed to the 2008 crisis. In this sense, rather than being a novel and disruptive idea, cryptocurrency replicates many of the systemically destabilizing aspects of privately issued money and money-like instruments.

This chapter proposes that, rather than allowing a new, digital “free banking” era to emerge, there are better alternatives. Specifically, it argues that the Federal Reserve (Fed) should use its tools to improve public payment systems, enact robust utility-like regulations for private digital currencies and limit the likelihood of bubbles using prudential measures.