Prudential Regulation

The new financial environment of the 1980s and 1990s has undoubtedly given rise to new risks that make the profitability of credit institutions increasingly uncertain. National and international financial transformations have led banks in Morocco to seek to expand their activities, open up internationally, and take more risk.
The Moroccan banking system suffers from a high amount of bad debts, insufficient provisioning and delays in debt collection. The objective of our study is to analyze the evolution of the fragility of Moroccan banks between 1993 and 2005.
We first assess the fragility of Moroccan commercial banks using the probabilistic method. Second, we analyze econometrically the relationship between the risk of default and the combination of some bank specific explanatory variables including equity. Our analysis shows that the evolution of the fragility of the Moroccan banking sector in general has decreased. This is mainly due to the importance of revenues from traditional operations and to the respect of prudential constraints on capital. On the other hand, bad loans seem to be the main threat of Moroccan banks, especially small banks which have seen their fragility increase during our analysis period.

Depuis les années quatre-vingt-dix, l'ensemble des établissements bancaires marocains doivent respecter un arsenal de ratios prudentiels, principalement le ratio de solvabilité. Le respect de ces mesures prudentielles, à aspect réglementaire, s'inscrit dans une logique de recherche d'une stabilité du système financier, essentiellement le système bancaire, et ce en réduisant les risques financiers et opérationnels encourus par les entités bancaires. En parallèle, les autorités de régulation ont exigé des banques un travail de gestion globale de bilan, la mise en place d'un système de contrôle de gestion, afin de gérer le risque opérationnel et un effort en termes d'engagements en fonction des risques encourus. Dans ce sens, les organisations bancaires doivent procéder à une gestion opérationnelle des risques en fonction d'une approche prudentielle, imposée par les législateurs. Ainsi, l'approche prudentielle, à caractère macro-économique, se présente comme un déterminant de l'approche opérationnelle, à caractère micro-économique. Cette approche opérationnelle prend la forme d'une stratégie que chaque entité bancaire doit élaborer pour gérer les différents risques bancaires. Cette étude cherche à analyser le problème de la gestion des risques entre l'approche prudentielle et l'approche opérationnelle.

This article was published in the Bar Association Law Journal [2008] Vol. XIV – Part I page 32 as a sequel to my previous article entitled “Taking the Profit out of Crime – Sri Lankan Style” published in the Journal of Financial Crime (2003) Vol. 10 No. 4. Both articles focused on the question of how Sri Lanka may prevent the laundering of, or facilitate the recovery of, funds that are plundered by its constitutionally appointed rulers, officials and criminals. In this article, recent legislative initiatives such as the Convention on the Suppression of Terrorist Financing Act No. 25 of 2005, the Prevention of Money Laundering Act No. 5 of 2006 and the Financial Transactions Reporting Act No. 6 of 2006 are examined in great detail in the backdrop of applicable prudential measures.

Se prezinta evoluţia sistemului bancar romanesc, cu principalii indicatori bilanţieri si de de performanţă ai bancilor. Se detaliaza aspecte privind promovarea stabilităţii economice, cu accent pe obiectivele pe termen scurt şi mediu în domeniul reglementării prudenţiale.

Păcatul originar nu este consumul pe datorie, ci disparităţile crescânde în procesul de distribuţie a valorii între profit şi salarii. Ţările care au realizat creşteri de PIB în condiţii costisitoare prin sporirea accentuată a datoriei publice şi private externe ar trebui să numească rezultatul activităţii lor economice nu Gross Domestic Product ci Gross Debt Product, conform profesorului ceh Tomas Sedlacek; Toţi doresc un stat mic când e vorba de taxe, dar când e vorba de bunuri publice şi alocaţii sociale se doreşte un stat puternic financiar;
Criza confirmă valabilitatea ideii keynesiene potrivit căreia trebuie acumulate resurse în vremurile de avânt economic pentru finanţarea stimulilor fiscali guvernamentali necesari în perioadele de recesiune => competenţă şi înţelepciune din partea factorilor de decizie => mix cu un dozaj corect al componentelor politicii macroeconomice;
Activitatea economică nu este numai o operaţiune tehnică fără legătură cu moralitatea => în trecut etica şi economia erau unite, iar acum cele două sunt separate => situaţia economică gravă la nivel mondial;
Pentru evitarea efectelor nocive determinate de funcţionarea liberă a pieţelor, se impune intervenţia statului prin reglementări adecvate, care să prevină excesele, abuzurile şi pagubele suportate de toţi cetăţenii (marea majoritate fără nici o vină în manifestarea disfuncţiilor pieţei) => a crede în autoreglementarea pieţelor este ca şi când ai considera că un cazinou poate fi lăsat pe mâna jucătorilor cu speranţa că aceştia se vor autodisciplina;
Când vorbim de actuala criză financiară şi economică a capitalismului nu se doreşte întoarcerea la comunism, ci identificarea unui sistem capitalist eficient, care să îmbine sustenabil virtuţile pieţei şi ale statului în condiţii de echilibru între eficienţa economică şi echitatea socială;
Cuvintele cheie ale viitorului sunt, după opinia noastră, echilibrul, cumpătarea şi economisirea. De aceea considerăm că paradigma economică compromisă de actuala criză “individualism, profit cu orice preţ şi indiferenţă faţă de valorile morale” se impune a fi înlocuită cu paradigma viitorului “spirit de solidaritate, profitabilitate în condiţii de stabilitate şi respect faţă de morala socială”.

Confidence in combining inflation-targeting-cum-flexible-exchange-rate regimes with isolated microprudential regulation as a means to guarantee both macroeconomic and financial stability has been shattered by the scale and synchronization of asset price booms and busts that preceded the current global financial crisis. This paper has a two-fold purpose. On the one hand, it explores the implications and challenges of acknowledging the need for coordination between monetary policies and macroprudential regulation. On the other, it points out specific challenges currently faced by central bankers in emerging economies, as they cope with policy and regulatory coordination in a context of debt overhang and unconventional monetary policies in advanced economies

Commentators agree that the crisis that boiled to a bubble in the fall of 2008 (“the Great Recession”) is the gravest downturn since the depression of the 1930s. That makes it one of the two greatest crises in the history of capitalism. And plainly, the crisis continues, yielding severe joblessness and a growing danger of government defaults, bank failures, and stock market crashes. Hundreds of commentators have sought to explain the crisis. Yet much remains murky, even paradoxical. This essay attempts to put the crisis in perspective by mapping the universe of crisis literature. It begins by framing some of the key questions posed in this literature. Next it offers sharply etched reviews of thirteen key books. The result is a multi-faceted portrait of a crisis that is still unfolding.

Confidence in combining inflation-targeting-cum-flexible-exchange-rate regimes with isolated microprudential regulation as a means to guarantee both macroeconomic and financial stability has been shattered by the scale and synchronization of the asset price booms and busts that preceded the global financial crisis. This note explores some of the ways in which monetary policy can address asset price booms and busts through its integration with macroprudential regulation.

The 2008 financial crisis has emphasized the importance of macro financial linkages. In the financial sector, attention is
now focusing on macro prudential regulations that are geared toward the stability of the financial system as a whole. In
the macro arena, the recognition that price stability was not sufficient to guarantee macroeconomic stability and that
financial imbalances developed despite low inflation and small output gaps has highlighted the need for additional tools
(macro prudential policies) to complement monetary policy in countercyclical management. Emerging markets (EMs)
face different conditions and have key structural features that can have a bearing on the relevance and efficacy of policy
measures. Drawing on Canuto and Ghosh (2013), this note discusses the challenges of dealing with macro financial
linkages and explores the policy toolkit available for dealing with systemic risks, particularly in the context of EMs.

We analyze if a change in accounting standard or a change in prudential regulation impacts banks' loan loss provision. We find that, in general, the banks using a principles-based accounting standard exhibit a lower level of earnings management compared to banks using a rules-based accounting standard. When a country moves from pro-cyclical macro-prudential regulations to a dynamic provisioning regime, banks are more likely to set aside a larger amount of loan loss provision for the purpose of income smoothing. ABSTRACT Article history:

摘 要：全球金融危机后，有关如何建立完善的货币政策和审慎监管体系的问题引起广泛争议；
而新兴市场国家由于自身更倾向于加剧经济繁荣和衰退程度，更易受负面金融市场冲击影响，故尤其
需要关注这一问题。本文以巴西和韩国为例，深入探讨了物价稳定、金融稳定双重目标下，究竟应如
何以互补方式实行货币政策和审慎监管。
关键词：金融危机 货币政策 审慎监管 新兴市场
After the global financial crisis, there was much discussion of how to improve monetary policy and establish a truly effective prudential regulatory system. This issue is particularly relevant in the case of emerging markets. Due to their greater tendencies to show wide swings in a cycle of boom and bust, emerging markets are more likely to be impacted by negative financial events. This paper reviews the experiences of Brazil and Korea, and discusses how to implement monetary policy and prudential regulation in a complementary way when jointly pursuing anti-inflation and financial stability objectives.

"Could either monetary policy or financial prudential regulation be relied on individually to mitigate asset price cycles or their effects? If both ways are effective, monetary policy and prudential regulation could then be considered “substitutes,” in
the sense that the individual use of either instrument leads to a reduction in the volatility of both corresponding targets. This
note, however, argues in favor of complementarity—rather than substitution—in the use of monetary and macroprudential policies: the combined (articulate) use of both policies tends to be more effective than a standalone implementation of either."

Prudential Financial is a Fortune 500 company that offers a wide range of financial products, including investment, asset management, securities and real estate services. Principal subsidiary, The Prudential Insurance Company of America, providing life insurance and annuities to individuals.
Headquartered in Newark, New Jersey, Prudential offers products in all 50 states. It also has branches in Asia, Latin America and Europe, offering a wide range of financial products to markets worldwide through various subsidiaries.
The company was founded in 1875 under the name of The Widow and Orphan Friendly Society. At the beginning of the 20th century, the company - now operating under the name Prudential Friendly Society - began to grow as fast as life policies sold door to door for poor families in urban industrial areas. Given the dangers of industrial work at the time, affordable life insurance is a product that is attractive, and this allows the company to grow.
Though started as a joint company, Prudential now public at the New York Stock Exchange in 2001. Prudential currently employs approximately 47,000 people and has annual net income of nearly 41 billion. Logo, a blue silhouette of the Rock of Gibraltar, is one of the most famous symbol of the company and has been used since the 1890s.

The Asian style of regional integration may be seen as a “quasi-common economy” that eschews a formal linkup in political
or monetary terms, but manages to generate similar results by strong physical integration and distributed chains of production
and service delivery. This note proposes the Asian quasi-common economy as a benchmark for South America’s regional
integration efforts because it is a better fit than the politically driven, broad-based, European style integrative process

Prezentarea trateaza subiecte precum: noile politici de reglementare şi abordări în domeniul supravegherii bancare, provocările în implementarea unui proces de supraveghere bazat pe mecanisme de evaluare a managementului riscului, practica europeană în domeniul supravegherii financiar-bancare (CEBS), aplicarea reglementărilor home-host la nivelul UE şi internaţional si necesitatea racordării comportamentului resurselor umane din sectorul financiar-bancar, la presiunea noului val de reglementări în domeniu.

In cadrul unei tari, exista o nevoie stringenta a unei combinatii eficiente, realiste, de politici economice, care sa asigure stabilitatea macroeconomica si premisele pentru o crestere economica sanatoasa, sustenabila, respectiv care sa nu genereze dezechilibre de tipul inflatiei, deficitului extern, deprecierii monedei nationale etc.
Aceasta lucrare subliniaza valentele, dar si limitele politicii prudentiale în cadrul mix-ului de politici economice. Respectarea dozajului eficient si utilizarea  fiecarei pârghii din cadrul mix-ului, asa cum a fost programat, dar si potrivit atributiilor, caracteristicii si continutului fiecareia dintre politici, constituie coordonate esentiale pentru eficienta mix-ului în ansamblul sau. Aceasta, deoarece nu se poate substitui inactiunea unei politici sau a alteia prin intensificarea actiunii altor politici care par mai facile, mai putin suparatoare pentru public la un moment sau altul. În aceste conditii, se produc efecte adverse sau perverse, iar rezultatele pot fi artificial favorabile pe termen scurt, dar pe termen mediu si lung ele devin negative, trebuind, ulterior, sa se recurga la utilizarea mai pronuntata a pârghiilor care au fost evitate în perioada anterioara, ceea ce genereaza un cost mai mare din punct de vedere economic si social, datorita neadoptarii la timp a masurilor corecte.

Se analizeaza mandatul BNR în relație cu instituțiile de credit, se prezinta activitatea de supraveghere a instituțiilor de credit, precum si competențele BNR în relație cu IFN.
Sănătatea financiară a sectorului bancar autohton, politica macroprudențială în UE și în România si evoluția creditării sectorului IFN se detaliaza in cadrul prezentarii.
Distribuția creditului după veniturile populației și potențialele riscuri de supra-îndatorare a acesteia, motivele pentru care sunt necesare măsuri prudenţiale ale BNR si descrierea măsurilor adoptate de BNR asupra sectorului IFN sunt prezentate in studiul de fata.
Direcţii de întărire a cadrului legal aferent sectorului IFN care necesită
modificări la nivelul legislaţiei specifice, factorii care au condus la înregistrarea de pierderi de către instituțiile de credit si evoluția profitului contabil și a principalelor sale componente reprezinta alte teme dezbatute.

Se prezinta reperele unui mix eficient de politici economice, factorii determinanţi ai intermedierii financiare în România, precum si riscurile la adresa stabilităţii macroeconomice. Se abordeaza subiecte referitoare la măsurile prudenţiale adoptate de BNR pentru limitarea creşterii nesustenabile a creditului în economie, precum si acţiunile anticiclice ale BNR după intrarea în recesiunea economică.

Efficient and well-functioning financial system is an essential factor in transforming centrally-planned economy into a market-oriented, globally integrated performer. Prolonged underdevelopment of a financial system increases the overall costs and risks associated with change efforts. Widening and diversifying of financial markets allows for improved allocations of savings and better productivity, new investment opportunities, and improved employment.

One of the important components of a well-functioning financial system is effective regulation that can provide confidence in the system as well as support the transformation. Global experience has taught us that financial liberalisation supports the economy growth, but also that the development efforts do not bring the same results everywhere. Developing countries such as Bosnia and Herzegovina can increase their chances for economic growth through liberalisation, creating new investments through increased deposits, which also increases the risk of banking crisis due to higher volatility. Therefore, it is important to look at the process of financial liberalisation and integration in combination with regulatory transformation. In case of BiH this also includes the role of the currency board. Policymakers in developing countries such as BiH can find valuable learning lessons in literature and empirical research that can be useful in better understanding the benefits and challenges associated with financial liberalisation. The experience from other countries clearly shows that there is a fine line between progressive liberalisation actions and effective regulations to support the transformation and provide confidence in the financial system. Open communication and encouragement of ideas among the main economic players (including general public) are the key elements in designing a balanced response to financial globalisation and transformation efforts.

The paper addresses some historical elements relevant to predominantly bank-oriented financial systems characteristic to many developing countries such as BiH, as well as pros and cons associated with economic development efforts, currency board, prudential regulation, and supervision practices.

Keywords: transformation of the economy, financial system, financial liberalisation and integration, prudential regulation and supervision, Bosnia and Herzegovina (BiH)

This article focuses on the EU implementation of final Basel III by explaining the background, legislative texts, expected impact on EU banks, proposed timeline, and EU-specific adjustments in relation to the internationally agreed text. A general overview is also given with respect to the other elements included in this EU regulatory package, such as ESG risks and third-country branches. Finally, there is an indication regarding the anticipated timeline and next steps.
Final Basel III impact on MCR across the world and in the EU

- The impact should be limited for American and Asian banks, but for the largest European banks, tier 1 minimum required capital (MRC) would increase significantly. The initial estimates showed an increase in MRC by approximately 25%, with a total capital shortfall of €135.1 billion for EU banks. Although, over the next few years, the expected impact has decreased but still remains significant for large European banks.

- The Commission’s preferred option is to retain existing EU specifics, introduce additional deviations, and delay implementation (option 2). This is expected to lead to an increase in EU banks' capital requirements of less than 9% – between 6.4% and 8.4% – on average at the end of the transitional period in 2030, compared to 18.5% without the EU specifics and adjustments were not applied (option 1). The Commission estimates a €27 billion capital shortfall for the largest banks in order to meet the MRC.

Commentators agree that the crisis that boiled to a bubble in the fall of 2008 (“the Great Recession”) is the gravest downturn since the depression of the 1930s. That makes it one of the two greatest crises in the history of capitalism. And plainly, the crisis continues, yielding severe joblessness and a growing danger of government defaults, bank failures, and stock market crashes. Hundreds of commentators have sought to explain the crisis. Yet much remains murky, even paradoxical. This essay attempts to put the crisis in perspective by mapping the universe of crisis literature. It begins by framing some of the key questions posed in this literature. Next it offers sharply etched reviews of thirteen key books. The result is a multi-faceted portrait of a crisis that is still unfolding.

The federalisation processes of US and EU financial supervision have both originally been founded on similar—although not identical—legal bases: regulating interstate commerce in the US (US Const., Art. 1, Sect. 8, Cl. 3) and establishing or ensuring the functioning of the internal market in the EU (Art. 114 TFEU).

The complexity of the US system, comprised of a patchwork of state and federal authorities mainly established in the first part of the twentieth century, is the product of both major economic failures and a specific political culture. The progressive federalisation of financial supervision within the EU is the result of a well-thought-out project of integration of the internal market. The last financial crisis and the recognition of the overarching objective of financial stability have nonetheless led to significant evolutions, more particularly through the establishment of the three European supervisory authorities (ESAs). Moreover, and perhaps more importantly, the latest initiatives related to the establishment of an EU Banking Union have profoundly transformed the underpinnings of financial supervision in the EU since it is, from this point forward, partially linked with the Economic and Monetary Union (EMU) process.

Within this framework, the purpose of this contribution is to explore how political and legal differences between the EU and US systems have shaped and influenced the structures and institutional aspects of supervision on both parts of the Atlantic without necessarily leading to significant divergences as to the contents of financial regulation. More specifically, a comparative study of these two systems highlights significant differences as to the interplay between federal and State supervisors.

Commentators agree that the crisis that boiled to a bubble in the fall of 2008 (“the Great Recession”) is the gravest downturn since the depression of the 1930s. That makes it one of the two greatest crises in the history of capitalism. And plainly, the crisis continues, yielding severe joblessness and a growing danger of government defaults, bank failures, and stock market crashes. Hundreds of commentators have sought to explain the crisis. Yet much remains murky, even paradoxical. This essay attempts to put the crisis in perspective by mapping the universe of crisis literature. It begins by framing some of the key questions posed in this literature. Next it offers sharply etched reviews of thirteen key books. The result is a multi-faceted portrait of a crisis that is still unfolding.

We analyze if a change in accounting standard or a change in prudential regulationimpacts banks’ loan loss provision. We find that, in general, the banks using aprinciples-based accounting standard exhibit a lower level of earnings managementcompared to banks using a rules-based accounting standard. When a country movesfrom pro-cyclical macro-prudential regulations to a dynamic provisioning regime,banks are more likely to set aside a larger amount of loan loss provision for the purposeof income smoothing.

Printre subiectele abordate in cadrul prezentarii se numara: evoluţia creditului neguvernamental de tip retail, strategia europeană în domeniul serviciilor bancare de retail, necesitatea redefinirii strategiilor la nivelul instituţiilor de credit ca urmare a implementării cerinţelor Basel II, tratamentul expunerilor retail si stadiul dezvoltării mijloacelor de supraveghere prudenţială.

Although the general risk taxonomy and definitions have been refined over the years, market risk can be broadly defined as the risk of financial loss due to movements in market prices such as interest rates, foreign exchange (currency) rates, equity prices, credit spreads and commodity prices that can adversely affect banks’ on- and off-balance sheet positions.
Interest rate risk (IRR) is a form of market risk that is especially relevant to various on- and off-balance sheet items whose cash flows are sensitive to interest rates (eg loans, bonds, deposits, interest rate derivatives). IRR can be analysed as a gap risk (arising from timing differences in maturity or repricing among a bank’s positions), basis risk (arising due to different interest rate indices, eg Libor, Euribor or some future risk free rates) and option risk (related to option derivative positions or embedded options). Furthermore, foreign exchange (FX) risk arises from currency fluctuations, equity risk is the risk of losses due to the adverse changes in equity prices, credit spread risk is driven by the changes in the credit quality of a debtor or counterparty, while commodity risk depends on the movements in commodity prices (eg grains, metals or oil). 
For this purpose, the market risk scope will be aligned with the definition used for minimum regulatory capital requirements, which is underpinned by the delineation between banking and trading book. From the European Banking Authority’s (EBA) perspective, ‘market risk stems from all the positions included in banks' trading book as well as from commodity...

A cikk a hitelélet legtipikusabb alanyaival kapcsolatos egyes adatvédelmi, prudens és ügyleti felelősségi kérdések elemző bemutatását, körüljárását kívánja feldogozni, rávilágítva néhány a hazai gyakorlatban is sokszor jelentkező problémára.

Commentators agree that the crisis that boiled to a bubble in the fall of 2008 (“the Great Recession”) is the gravest downturn since the depression of the 1930s. That makes it one of the two greatest crises in the history of capitalism. And plainly, the crisis continues, yielding severe joblessness and a growing danger of government defaults, bank failures, and stock market crashes. Hundreds of commentators have sought to explain the crisis. Yet much remains murky, even paradoxical. This essay attempts to put the crisis in perspective by mapping the universe of crisis literature. It begins by framing some of the key questions posed in this literature. Next it offers sharply etched reviews of thirteen key books. The result is a multi-faceted portrait of a crisis that is still unfolding.