Search results

The internationalization of pharmaceutical firms faces major barriers in terms of managing regulatory requirements in various international markets. This paper aims to identify the requirements related to regulations in various markets of the world. It further seeks to identify how the firms develop such capabilities i.e. processes undertaken by the firms to develop regulatory capabilities.

The research is exploratory in nature. Case study method is adopted to study the requirements related to regulations in international markets and processes to build regulatory capabilities.

To manage regulatory requirements firms need knowledge related to plant approval and product registration. Firms have to submit dossiers to the respective country's regulatory authority to get plant approval and product registration. They can simultaneously apply for both to save time to enter the target market. The requirements for each market are unique in terms of format and contents for dossier preparation. Dossier preparation needs data from various departments which calls for good coordination among various functional areas, i.e. production, QA and QC, R&D, purchasing, etc. If the firm has operations in multiple markets and offers multiple products in a single market the regulatory function is separately organized for less regulated, semi‐regulated and regulated markets.

Pharmaceutical firms targeting international markets can get insight into the regulatory requirements and the process to be adopted to build regulatory requirements.

The paper shows that firms use a systematic process to build capabilities for managing regulations. The paper also offers a process model for firms to build regulatory capabilities for internationalization.

For years, interim financial reports in South Africa were regulated by the South African Companies Act No. 61 of 1973 (as amended) (i.e. statutory requirements) and by the Johannesburg Stock Exchange (JSE) Listing Requirements (i.e. regulatory requirements) only. However, on the international front, major progress was being made in respect of improving the quality of interim financial reporting. South Africa soon followed suit and issued its own accounting statement, AC 127, which is based on the international standard (IAS 34). The School of Accountancy at the University of Pretoria commenced a research project on interim financial reporting in 1997 to investigate compliance with related reporting requirements. This paper is a product of the project. The purpose of the study reported in this paper was to: [a] Compare the requirements stated in IAS 34 and AC 127 with the local regulatory and statutory requirements, to determine whether these requirements are duplicated and to establish in which respect the accounting standards require additional disclosure requirements. [b] Provide an overview of the extent to which companies listed on the JSE adhered to IAS 34 and AC 127 and complied with regulatory and statutory requirements in their interim financial reports in the period 1997 to 1999. [c] Make recommendations regarding the improvement of local statutory and regulatory disclosure requirements.

To explain the Securities anld Futures Commission of Hong Kong’s new FAQs on external electronic data storage.

The article analyses the existing legal and regulatory requirements relating to the keeping of records as well as the circular and FAQs on the use of external electronic data storage. It also discusses the practical implications of the newly added FAQs.

The SFC has relaxed the requirement as regards the appointment of two Managers-In-Charge in Hong Kong for the purposes of the circular on the use of external electronic data storage. The SFC has offered more flexibility with respect to the undertaking by electronic data storage providers in the FAQs. The FAQs have also provided more certainty with respect to the approval requirements pursuant to section 130 of the SFO where non-Hong Kong affiliates are concerned.

The additional guidance from the SFC regarding external electronic data storage in the form of the new FAQs shows a helpful clarification in the SFC’s approach on the practical implementation of the relevant requirements under the circular on the use of external electronic data storage.

The article offers practical guidance in respect of the implications of the newly added FAQs on the external electronic data storage regime from experienced financial services and asset management lawyers.

The purpose of this paper is to provide selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in June, July, and August 2012.

The paper provides FINRA Regulatory Notice 12‐40, SEC Approves New FINRA Rule 5123 Regarding Private Placements of Securities; Regulatory Notice 12‐44, SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements); Regulatory Notice 12‐55, Guidance on FINRA's Suitability Rule; and Regulatory Notice 13‐13, Trading and Quotation Halts in OTC Equity Securities; Trade Reporting Notice of April 17, 2013: Reduction of Reporting Times for Agency Pass‐Through Mortgage‐Backed Securities Traded TBA.

Notice 12‐40: FINRA Rule 5123 is part of a multi‐pronged approach to enhance oversight and investor protection in private placements; the rule will provide FINRA with more timely and complete information about the private placement activities of firms on behalf of other issuers. Notice 12‐44: The SEC approved amendments to FINRA Rule 4210 (Margin Requirements) related to option spread strategies, maintenance margin requirements for non‐margin eligible equity securities, free‐riding, “exempt accounts” and stress testing in portfolio margin accounts. Notice 12‐55: This Notice addresses two issues discussed in Regulatory Notice 12‐25: the scope of the terms “customer” and “investment strategy.” Notice 12‐25 provided guidance in a “frequently asked questions” format in FINRA Rule 2111 (Suitability). Notice 13‐13: The SEC approved amendments to FINRA Rule 6440, which provides authority for FINRA to initiate trading and quotation halts in OTC equity securities in circumstances where it is necessary to protect investors and the public; the rule provides authority to impose foreign regulatory halts, derivative halts and extraordinary event halts. Trade Reporting Notice of April 17, 2013: FINRA reminds firms of the coming reduction in reporting periods for the timely reporting of transactions in agency pass‐through mortgage‐backed securities traded TBA (to be announced) for good delivery and products not traded for good delivery.

These FINRA notices are selected to provide a useful indication of regulatory trends.

This analysis asks whether regulatory capital requirements capture differences in systematic risk for large firms and micro-, small- and medium-sized enterprises (MSMEs). The authors explore whether bank capital regulations intended to support SMEs’ access to borrowing are effective. The purpose of this paper is to find out whether the regulatory design (particularly the estimate of asset correlations) positively affects the lending process to small and medium enterprises, compared to large corporates.

The authors investigate the appropriateness of bank capital requirements considering default risk of loans to MSMEs and distortions in capital charges between MSMEs and large firms under the Basel III framework. The authors compiled firm-level data to capture the proportions of MSMEs and large firms in Italy during 2000–2014. The data set is drawn from financial reports of 708,041 firms over 15 years. Unlike most empirical studies that correlate assets and defaults, this study assesses a firm’s creditworthiness not by agency ratings or by sampling banks but by a specific model to estimate one-year probabilities of default.

The authors found that asset correlations increase with firms’ size and that large firms face considerably greater systematic risk than MSMEs. However, the empirical values are much lower than regulatory values. Moreover, when the authors focused on the MSME segment, systematic risk is rather stable and varies significantly with turnover. This analysis showed that the regulatory supporting factor represents a valuable attempt to treat MSME loans more fairly with respect to banks’ capital requirements. Basel III-internal ratings-based approach results show that when the supporting factor is applied, the Risk-Weighted-Assets (RWA) differences between MSMEs and large firms increase.

The implications of this research is that banking regulators to make MSMEs support more effective should review asset correlation estimation criteria, refining the fitting with empirical evidence.

The asset correlation parameter stipulated by the Basel framework is invariant with economic cycles, decreases with borrowers’ probability of default and increases with borrowers’ assets. The authors found that those relations do not hold. This way, asset correlations fall below parameters defined by regulatory formula, and SMEs’ credit risk could be overstated, resulting in a capital crunch.

The original contribution of this paper is to demonstrate that the gap between empirical and regulatory capital charge remains high. When the authors examined the Basel III-IRBA, results showed that when the supporting factor is applied, the RWA differences between MSMEs and large firms increase. This is particularly strong for loans to small- and medium-sized companies. Correctly calibrating asset correlations associated with the supporting factor eliminates regulatory distortions, reducing the gap in capital charges between loans to large corporate and MSMEs.

Refers to previous research to suggest that US commercial bank managers use discretion to “manage” regulatory capital and that accounting discretion can influence a bank’s investment opportunity set (IOS) and therefore its share price. Challenges the assumption that using accounting discretion to manipulate contracting variables will only result in a redistribution of wealth. Develops a mathematical model based on Feltham and Ohlson (1995) and uses it to explore the bank manager’s optimal investment in risky assets, the constraint on investment choice produced by minimum regulatory capital requirements and how accounting discretion can reduce this. Shows that regulatory requirements do constrain a bank’s IOS but that discretion (e.g. over loan loss provisions) can only mitigate this if dividend and financing policies depend on the discretionary components.

Financial crises (FC) remain a global threat to the financial stability of financial institutions and international bank regulatory capital requirement (IBRCR) by the Committee on Banking Supervision provides mechanism for curbing the adverse effect of FC on financial stability. Hence, the purpose of this study is to provide, evidence on how IBRCR tones down the adverse FC effects on bank financial stability (BFS).

The study uses 102 economies between 2006 and 2016 in a two-step dynamic generalized method of moments model.

The results show that while FC and IBRCR negatively and positively impact BFS, respectively, it is observed that under the increasing presence of IBRCR, the negative effect of FC on BFS declines. Additionally, the results show that economies that maintain minimum IBRCR above 10.5% recommended by BASEL III are able to reinforce a significant reduction in the negative effect of FC on BFS.

These findings imply that in as much as financial crisis is injurious to BFS, regulators and policymakers can rely on IBRCR to avert the injurious effects of FC on BFS. Clearly, while IBRCR is necessary for reinforcing BFS through FC, bank managers who maintain IBRCR above the recommended 10.5% stands a better chance to taming the avert effect of FC on BFS. Additionally, economies that have not full adopted the BASEL minimum capital requirement may have to do so given its potential of dampening the adverse effect of FC on BFS.

The study presents an international perspective of how BASEL capital requirements can help tame global financial crisis using a global sample of 102 economies.

This paper aims to utilize institutional theory to examine the impact of the 2008-2010 regulatory reforms on compliance with mandatory disclosures by savings and credit co-operatives (SACCOs) in Kenya.

Two-stage least squares panel regression approach is utilized to analyse data covering 1,272 firm-year observations for 212 SACCOs over a six-year period, 2008-2013. An analysis of the pre- and post-regulation impacts on compliance with mandatory disclosure requirements is also performed.

The results, which are in support of the institutional theory, reveal that licensed SACCOs engage in higher compliance with mandatory disclosures, and this improves from the pre- to the post-regulation period. The results show that SACCOs under inquiry engage in lower compliance with mandatory disclosure requirements, especially in the post-regulation period. The findings also reveal a significant and positive association between SACCO size, co-operative governance and compliance with mandatory disclosure requirements.

The study focuses on transition-level SACCOs in a single country. An extension into other jurisdictions with nascent, transitional and mature SACCOs would provide greater insights into the impact of disclosure regulation. Further, the study uses a self-constructed disclosure checklist which is subject to coding errors and biases.

The findings highlight the need for SACCO regulators and accounting professional body to devise incentives to improve the level of compliance with required disclosures.

The study contributes to the dearth of evidence on the efficacy of the introduction of mandatory disclosure requirements in a developing country where compliance is problematic because of difficulties with enforcement.

This study aims to define the role of the Financial Action Task Force (FATF) and its Style Regional Bodies (FSRBs) that combat money laundering (ML) and terrorist financing (TF) by measuring how well some Arab countries have complied with FATF’s “Forty Recommendations” with respect to the regulatory framework.

This study combines the comparative analysis methodology with a descriptive analytical approach to compare three member countries of the Middle East and North Africa Financial Action Task Force (MENAFATF). It uses secondary data sources, namely, theoretical literature on the subject and FATF reports on mutual evaluation reports (MERs).

This study examined the variations in compliance with FATF standards among three member countries of MENAFATF: Bahrain, Morocco and Jordan. While Bahrain has almost completely fulfilled these standards, Morocco and Jordan have only partially fulfilled them. These variations in compliance are mainly attributed to the uneven level of readiness in the countries’ commitment to the legislative and regulatory requirements before the process of mutual evaluation.

Researchers can find several studies on the role of FATF and FSRBs in combating ML and TF. However, no studies have focussed on the application levels of FATF standards, which are relevant to the regulatory frameworks of member countries. This study makes a unique and vital contribution, as it demonstrates the effectiveness of applying the FATF standards.

This paper aims to investigate the adequacy of regulatory capital funds through loss provisioning policies because of worsening credit quality associated with distressed financial conditions. A financial distress occurs when banks have difficulty in honoring financial commitments. This paper is expected to unveil how the provisioning mechanisms can address concerns associated with pro cyclicality of regulatory capital funds requirements, and how the banks behave in distressed financial conditions to share risks. The pro cyclicality of regulatory capital funds is the effect of various components of the financial system that aggravates the economic cycle such as during the expansion of the economy when banks are able to provide more loans and meet regulatory capital requirements with ease, while during the contraction of the economic cycle, can lead to deterioration of asset quality, and the resultant need to make loss provisions and recognize impairment. In turn, the situation puts further pressures on the capital requirements held by banks and their risk-sharing behavior. The paper analyzes a sample of Islamic banks in Malaysia.

By estimating credit risk-related information through loss provisioning policies, the paper uses an unbalanced panel data on all Islamic banks in the Association of Islamic Banking Institutions Malaysia from 2003 to 2014. The association consists of full-fledged Islamic banks and several foreign-owned entities.

The paper findings support that Islamic banks during observed period of distressed financial conditions were less discouraged to increase their regulatory capital funds to share risks. Intuitively, they were more encouraged to engage in risk-shifting behavior. Also, the risk-shifting behavior was found to have a significantly high potential in foreign-owned Islamic banks than in domestic Islamic banks.

Although the study is based on a sample of Islamic banks in Malaysia, the findings suggest targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing.

The outcome of this paper has practical implications for Islamic banks to build a buffer of capital funds to face downward pressures during heightened financial uncertainties while serving as protection to depositors. Moreover, this study has practical implications for shareholders to avail themselves the benefits of high investment accounts financing. The Islamic banks can continue to play their role in promoting inclusive growth, reducing inequality and accelerating poverty reduction.

Although the current study is based on a sample of Islamic banks in Malaysia, the finding suggests that the extent of risk shifting was significantly more incentivized among the foreign-owned rather than the domestic Islamic banks. This information can be used to develop targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing.

This paper is the first that investigates on adequacy of regulatory capital funds of Islamic banks through loss provisioning policies.