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Article
Publication date: 1 June 2004

Donato Masciandaro

The objective of this work is to analyse worldwide trends in financial supervision architectures. The focus is on the key issue in the debate – the single supervisor…

1297

Abstract

The objective of this work is to analyse worldwide trends in financial supervision architectures. The focus is on the key issue in the debate – the single supervisor versus multiauthority model – in order to build up indexes of supervision unification, essential to perform studies on the causes and effects of various supervisory regimes. First, the paper introduces a Financial Authorities’ Concentration (FAC) Index. A comparative analysis of 69 countries confirmed that an increase in the degree of concentration of supervisory powers is evident in the developed countries, and particularly in the European Union. Secondly, the paper considers the nature of the institutions to which control responsibilities are entrusted. In particular, the role the central bank plays in the various national institutional settings is examined. An index of the central bank’s involvement in financial supervision is introduced, the Central Bank as Financial Authority (CBFA) Index. Each national institutional structure can be identified with the two above characteristics. Two models are the most frequent: (a) countries with a high level of unification of powers and weak central bank involvement (single financial authority regimes); and, (b) countries with a low level of unification of powers and strong central bank involvement (central bank dominated multiple supervisor regimes). A trade‐off therefore emerges between the degree of financial sector unification and the role of the central bank. Two possible explanations of this relationship emerged: the blurring hazard effect and the monopolistic bureau effect.

Details

Journal of Financial Regulation and Compliance, vol. 12 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 31 July 2007

Donato Masciandaro, Maria J. Nieto and Henriette Prast

This paper aims to analyse the economics of financing banking supervision and attempts to respond to two questions: What are the most common financing practices? Can the…

1252

Abstract

Purpose

This paper aims to analyse the economics of financing banking supervision and attempts to respond to two questions: What are the most common financing practices? Can the differences in current financing practices be explained by country‐specific factors, using a path‐dependence approach?

Design/methodology/approach

The paper performs an empirical analysis that identifies the determinants of the financing structure of banks' prudential supervision using a sample of 90 banking supervisors (central banks and financial authorities).

Findings

The paper concludes that supervisors in central banks are more likely to be publicly funded, while financial authorities are more likely to be funded via a levy on the regulated banks. The financing rule is also explained by the structure of the financial systems. Public funding is more likely in bank‐oriented structures. Finally, the geographical factor is also significant: European bank supervisors are more oriented towards the private funding regime.

Practical implications

In general, the paper does not find evidence of the role of the political factor, the size of the economy, the level of development and the legal tradition.

Originality/value

The paper analyses the financial governance of banking supervision in a sample of 90 countries world‐wide. The empirical analysis focuses on the financing rules and identifies factors that explain the differences between supervisory authorities.

Details

Journal of Financial Regulation and Compliance, vol. 15 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 14 November 2008

Lucia Dalla Pellegrina and Donato Masciandaro

This paper aims to investigate the role of the quality of government on financial supervisory structures in different countries.

1076

Abstract

Purpose

This paper aims to investigate the role of the quality of government on financial supervisory structures in different countries.

Design/methodology/approach

The objectives are pursued by means of econometric tools based on probit and multinomial logit techniques.

Findings

It is found that the quality of government plays a crucial role in determining supervision unification. “Good” policymakers (helping hand types) prefer a unified financial authority while “bad” ones (grabbing hand type) choose specialized or hybrid models depending on how powerful is the central bank.

Research limitations/implications

Research limitations are represented by the endogenous nature of political variables with respect to the supervisory design. Suggestions for future research rely on finding adequate instrumental variables to be included in the empirical analysis in order to address causality issues.

Practical implications

The paper follows a positive approach, explaining why different supervisory structures are observed around the world. As a consequence, it does not provide any normative implication.

Originality/value

Its original contribution can be identified in the first attempt to include political preferences in determining the choice among different regimes of financial supervision.

Details

Journal of Financial Regulation and Compliance, vol. 16 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 24 May 2013

James R. Barth, Gerard Caprio and Ross Levine

The purpose of this paper is to discuss and provide new data and measures of bank regulatory and supervisory policies in 180 countries from 1999 to 2011.

3531

Abstract

Purpose

The purpose of this paper is to discuss and provide new data and measures of bank regulatory and supervisory policies in 180 countries from 1999 to 2011.

Design/methodology/approach

The authors' approach is based upon the quantification of hundreds of questions, including information on permissible bank activities, capital requirements, the powers of official supervisory agencies, information disclosure requirements, external governance mechanisms, deposit insurance, barriers to entry, and loan provisioning, to form indices of key bank regulatory and supervisory policies.

Findings

It is found that the regulation and supervision of banks varies widely across countries in many different dimensions. Furthermore, there has not been a convergence in bank regulatory regimes over the past decade despite the worst global financial crisis since the Great Depression.

Research limitations/implications

The data are based on survey responses and this requires that the answers be accurate. To better ensure this is the case, several checks were made to ensure greater accuracy in all the answers. Using this database one can perform various statistical analyses in attempt to determine which bank regulatory regimes work best to promote well‐functioning banking systems.

Originality/value

The authors' data and measures are new and unique so as enable policy makers and researchers to examine cross‐country comparisons and analyses of changes in banking policies over time.

Details

Journal of Financial Economic Policy, vol. 5 no. 2
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 9 February 2015

Alexander Stöhr

Financial crises pose a challenge to the legal systems of the concerned countries and international organizations. The current crisis has exposed significant failures of…

Abstract

Purpose

Financial crises pose a challenge to the legal systems of the concerned countries and international organizations. The current crisis has exposed significant failures of regulation and supervision, making the Financial Market Law a key topic on the political agenda. Thus, great changes and challenges are ahead of us. These were the focus of an interdisciplinary and comparative conference held at the University of Marburg. The paper deals with the individual presentations and carries out an overall analysis.

Design/methodology/approach

The paper covers the most important issues in financial regulation.

Findings

An extensive regulation is confronted with several obstacles; suitable approach could be the co-regulation; desirable aim is the instauration of the mechanism of capital markets. Those who gain the benefits in case of success should also bear the losses in case of failure instead of being rescued at taxpayers’ expense.

Originality/value

The difficulties arising from extensive regulation suggest a more liberal approach to financial regulation.

Details

Journal of Financial Regulation and Compliance, vol. 23 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 1 January 2006

Edgardo Demaestri and Federico Guerrero

Aims to review the potential risks associated with the separation of banking regulation from the orbit of the central bank in Latin‐American and Caribbean countries (LAC).

604

Abstract

Purpose

Aims to review the potential risks associated with the separation of banking regulation from the orbit of the central bank in Latin‐American and Caribbean countries (LAC).

Design/methodology/approach

Sets out information on the banking regulators in LAC and on the current degree of involvement of the central bank in banking regulation; the main monetary policy issues connected to the separation of banking regulation from the central bank; and the main banking regulation issues involved.

Findings

The separation of banking regulation from the central bank would not present any great danger to LAC currently. However, the need to conduct the move in accordance with best principles must be emphasized.

Originality/value

Given the fertile ground offered by the countries of LAC, this paper presents arguably the most comprehensive examination to date of this “hot potato”.

Details

Journal of Financial Regulation and Compliance, vol. 14 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Book part
Publication date: 10 February 2015

Andrew Bowman, Julie Froud, Sukhdev Johal, Michael Moran and Karel Williams

This exploratory paper discusses the undemocratic agenda setting of elites in Britain and how it has changed politics within a form of capitalism where much is left…

Abstract

This exploratory paper discusses the undemocratic agenda setting of elites in Britain and how it has changed politics within a form of capitalism where much is left undisclosed in terms of mechanism and methods. It argues for a more radical exploratory strategy using C. Wright Mills’ understanding that what is left undisclosed is crucially important to elite existence and power, while recognising the limits on democratic accountability when debate, decision and action in complex capitalist societies can be frustrated or hijacked by small groups. Have British business elites, through their relation with political elites, used their power to constrain democratic citizenship? Our hypothesis is that the power of business elites is most likely conjuncturally specific and geographically bounded with distinct national differences. In the United Kingdom, the outcomes are often contingent and unstable as business elites try to manage democracy; moreover, the composition and organisation of business elites have changed through successive conjunctures.

Details

Elites on Trial
Type: Book
ISBN: 978-1-78441-680-5

Keywords

Book part
Publication date: 23 October 2017

Dragan Momirović, Marko Janković and Maja Ranđelović

The economic and financial crisis, especially the sovereign debt crisis, discovered many deficiencies and weaknesses in the banking sector in the European Union (EU). The…

Abstract

The economic and financial crisis, especially the sovereign debt crisis, discovered many deficiencies and weaknesses in the banking sector in the European Union (EU). The need for special surveillance and supervision of cross-border banking cooperation and termination of the toxic link between sovereign debt and banking sector have accelerated the process of forming and establishing a Banking Union (BU). An integrated financial framework has been established in which the European Central Bank (ECB) through the Single Supervisory Mechanism (SSM) has a key role and the responsibility for the overall supervision of the banking sector of the euro zone. The Single Resolution Mechanism (SRM) and schemes of the Single Deposit Guarantee Mechanism (SDGM) are under the national supervisory authorities while the European Banking Authority (EBA) is responsible for developing the Single Rules. From the new architecture is expected the preservation of the single market and a common currency, breaking “toxic connections” between sovereign debt and banks, mitigation and removal of financial instability and economic growth. The research shows that the BU together with the ECB in a certain sense, also contributes to the normalization of credit and financial conditions in the single mark. Estimates through SSM, conducted by the ECB and the EBA, during, 2014 and 2015 on 107 banks in 21 countries indicate progress toward solvency and resilience of the banking system of the euro area. Despite some initial success the entire project BU seems to have missed on opportunities, resulted in late reactions, and was too complex to be feasible. The political will of national governments to give up sovereignty over its banking sector and transfer competencies to the supranational institutions is a key factor in the success or failure of a BU. It seems so but past experience indicates that there is no political willingness to solve problems. Mainly most of the government avoids cleaning a hidden “skeleton in closets” due to lack of means for recapitalization while some are trying for loans from the ECB to help their banks. The ECB plays a key oversight role at the EU level and has too much power, which can cause risks caused by conflicting goals. The ECB is losing the role of the final refuge of liquidity, which is the main disadvantage of a BU. The SSM is susceptible to criticism due to difficulty in operation because of slow incorporation of European legislation into national law. Slow implementation carries risks of fragmentation of the market, regardless of the responsibility of the ECB. The financial capacity of the temporary agreement with the SRM is insufficient in solving the crisis of more banks while procedural application is complex and time-consuming. Planned backstop with a centralized resource is a resolution that is insufficient for solving the failure of big systemic banks, which are too big to bail. The heterogeneity of the existing Deposit Guarantee Schemes (DGS) and the banking systems of the member states of the euro zone caused controversy in terms of setting of common insurance schemes. The procedures for the recovery and resolution of critical banks are problematic.

Details

Economic Imbalances and Institutional Changes to the Euro and the European Union
Type: Book
ISBN: 978-1-78714-510-8

Keywords

Article
Publication date: 1 April 1997

Philip Woolfson

The Single Market in financial services (investment funds, banking, insurance and investment services) has had a long gestation and has been a mixed success. It is now…

Abstract

The Single Market in financial services (investment funds, banking, insurance and investment services) has had a long gestation and has been a mixed success. It is now faced with a new challenge, the adaptation of the Community regulatory framework to an electronic environment. This paper reviews progress in creating a Single Market in financial services, in particular the application of freedoms to provide services and of establishment and the principles of mutual recognition, home country control and the single licence. It also identifies issues in relation to electronic advertising, marketing and provision of financial services on a cross‐border basis. The paper seeks to show that existing and proposed Community legislation provides a framework for future development of this new medium:

Details

Journal of Financial Regulation and Compliance, vol. 5 no. 4
Type: Research Article
ISSN: 1358-1988

Article
Publication date: 1 April 1995

MAXIMILIAN J.B. HALL

During 1993 Member States of the European Union formally adopted two Directives—the Investment Services Directive and the Capital Adequacy Directive—concerned with the…

Abstract

During 1993 Member States of the European Union formally adopted two Directives—the Investment Services Directive and the Capital Adequacy Directive—concerned with the operation of investment business. This paper outlines the provisions contained in these Directives, which have to be enshrined in national law by the end of 1995 at the latest, explaining the role they play within the broader Single Market programme for financial services. A simple ‘cost‐benefit’ analysis of their likely impact, mainly on UK intermediaries, is also provided.

Details

Journal of Financial Regulation and Compliance, vol. 3 no. 4
Type: Research Article
ISSN: 1358-1988

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