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The financial stability of the commercial banking sector remains one of the critical responsibilities of the Reserve Bank of India (RBI). Weak banks cause instability in the financial system, triggering depositor runs. While several studies covered the prompt corrective action framework (PCA) for identifying weak banks, very few delve into the simplification of the same. This paper debates the opportunities to simplify using new parameters that reflect signs of weakness in a commercial bank. The PCA framework introduced in December 2002 marked a paradigm shift in the RBI's supervision mechanism. At its inception, the RBI used three parameters (capital to risk-weighted assets, net non-performing assets, and return on assets) to identify weak banks. In 2017, the RBI added two more parameters (tier-1 leverage, common tier-1 equity) to build rigour in the framework. Banks that breach the threshold in any of these financial parameters could come under the RBI's lenses. Under such a situation, the bank has to operate under constraints imposed on expansion, managerial compensation, raising deposits, and dividends distribution. This article explores new ratios and establishes their application in PCA using "linear discriminant analysis". We debate reducing the number of parameters from five to two, and conclude that only coverage ratio (new) and credit-to-deposit ratio (new) could simplify PCA without diluting its effectiveness. [ABSTRACT FROM AUTHOR]

The global financial crisis of 2008, triggered by the collapse of Lehman Brothers, highlighted a banking system that was widely exposed to systemic risk. The minimization of the systemic risk via a close and detailed monitoring of the entire banking network became a priority. This is a complex and demanding task considering the size of the banking systems; in the US and the EU they include more than 10,000 institutions. In this paper, we introduce a methodology which identifies a subset of banks that can: (a) efficiently represent the behavior of the whole banking system, and (b), provide, in the case of a failure, a plausible range of the crisis dispersion. The proposed methodology can be used by the regulators as an auxiliary monitoring tool to identify groups of banks that are potentially in distress and try to swiftly remedy their problems and minimize the propagation of the crisis by restricting contagion. This methodology is based on graph theory, and more specifically, complex networks. We termed this setting a "multivariate Threshold–Minimum Dominating Set" (mT-MDS), and it is an extension of the Threshold–Minimum Dominating Set methodology. The method was tested on a dataset of 570 U.S. banks, including 429 solvent ones and 141 failed ones. The variables used to create the networks were as follows: the total interest expense; the total interest income; the tier 1 (core) risk-based capital; and the total assets. The empirical results reveal that the proposed methodology can be successfully employed as an auxiliary tool for the efficient supervision of a large banking network. [ABSTRACT FROM AUTHOR]

Risk analysis and scenario testing are two of the core activities carried out by economists at central banks. With the increasing adoption of machine learning to enhance decision-support systems, and the amount of collected data spiking, institutions provide countless use-cases for the application of these innovative technologies. Consequently, in recent years, the term sup-tech has entered the financial jargon and is here to stay. In this paper, we address risk assessment from a central bank's perspective. The uptrending number of involved banks and institutions raises the necessity of a standardised risk methodology. For that reason, we adopted the Risk Assessment Methodology (RAS), the quantitative pillar from the Supervisory Review and Evaluation Process (SREP). Based on real-world supervisory data from the Portuguese banking sector, from March 2014 until August 2021, we successfully model the supervisory risk assessment process, in its quantitative approach by the RAS. Our findings and the resulting model are proposed as an Early Warning System that can support supervisors in their day-to-day tasks, as well as within the SREP process. [ABSTRACT FROM AUTHOR]

Researching the problems of banking supervision in the course of the policy of cleaning the banking system of Ukraine is of particular importance. The issues of efficiency of regulation of the activities of commercial banks with the help of economic standards of the NBU remain topical. The article is aimed at a theoretical-methodical substantiation of the NBU economic standards system and identifying the peculiarities of their application as instruments for regulating the banking activities. The state of compliance with capital, liquidity and credit risk standards by commercial banks of Ukraine is examined. A correlation and regression analysis of the impact of credit risk standards on the volumes of overdue credit arrears of banks is carried out. Ways to improve the system of regulation of the activities of commercial banks based on the principles developed by the Basel Committee on Banking Supervision are proposed. A further proposal is made as to introducing an additional economic standard for the regulation of credit risks, which would assess the risks of repayment of loans. In addition, it will be expedient for Ukraine to build a conceptual banking supervision, which will ensure close interaction of components in order to improve the efficiency of banking institutions. A comprehensive system of banking supervision should diagnose the level of risks and implement systems of their management at the level of each separate banking institution.

Copyright of Finance & Business Economies Review is the property of Finance & Business Economies Review and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Since 2015 European and national audit offices have been expressing discontent with their audit powers regarding banking supervision. Key to this discontent is the European Court of Auditor's limited mandate vis-à-vis the ECB's supervisory activities, which in practice means that the former does not have towards the ECB's Single Supervisory Mechanism the same full audit powers it has vis-à-vis all other EU institutions and agencies. This limitation is ultimately based on the principle of central bank independence as enshrined in Article 130 of the Treaty on the Functioning of the European Union. In addition to the above, national auditors have recently criticized their alleged difficulty to access all relevant information concerning supervision of less significant banks, since some documents may be considered by the ECB to be not accessible to national audit offices. These two aspects limiting the power of European and national audit offices (also identified as the first and second audit gap) seem to be related since the latter gap arises in part from the restricted mandate regarding the supervision of the ECB's supervisory function. This article explores the conditions for the existence of an audit gap and its real significance, mainly by assessing whether national audit offices had a mandate to audit their banking supervisor in the first place. It also addresses the formula of a memorandum of understanding agreed between the ECA and the ECB with the purpose of enhancing the cooperation between both institutions in the context of an audit to the ECB's supervisor function, and the role of the L-bank judgement in the understanding of the relations between the European Court of Auditors, the ECB, the national audit offices and national banking supervisors. [ABSTRACT FROM AUTHOR]

Following the Great Financial Crisis, European Union (EU) rules in the area of banking supervision have become ever more strongly influenced by the (formally non-binding) standards developed by international financial fora, chief of which are the G20 and the Basel Committee on Banking Supervision. European representation in these fora fluctuates, as varying, though, reduced groups of individual Member States are involved directly alongside EU institutions and bodies. Taking the example of the Basel Accords, this article sets forth to examine how the European participation in those fora is articulated, whilst also assessing the existing mechanisms of democratic accountability. Indeed, in view of the important constraints these standards impose on European legislators, it is of utmost importance that they be involved early on when they are defined to avoid any democratic accountability gap from arising. [ABSTRACT FROM AUTHOR]

Copyright of Economic Sciences is the property of Republic of Iraq Ministry of Higher Education & Scientific Research (MOHESR) and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Accounting & Financial Studies Journal is the property of Republic of Iraq Ministry of Higher Education & Scientific Research (MOHESR) and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Banking operations are business activities, which are directly related to the achievement of macroeconomic objectives, including the objectives of ensuring the stability of the value of money, controlling inflation and ensuring the safety of banking operations and the system of credit institutions. For the safe and sustainable development of banking operations, risks that threaten the safety of banking operations need to be detected and prevented in a timely manner. Credit institutions in the concept of banking crime are both tools and targets of attacks by criminals, so they can be involved in many different crimes. Criminal acts arising in banking operations may be committed by people of a credit institution or may be outsiders, and it is also not uncommon for cases of collusion between bank employees and outside criminals. In order to effectively prevent crimes arising in banking activities, it is necessary to coordinate between the internal prevention institutions of the credit institutions and strong involvement from the investigating agencies as well as from the competent authority to supervise banking activities. Banking supervision plays an important role in detecting early signs of crime in order to give early warnings to credit institutions to take timely preventive and control measures. [ABSTRACT FROM AUTHOR]

The content of banking regulation and supervision, its structural and functional elements and features of implementation in traditional and Islamic financial systems have been revealed. Special attention to the issues of evolution of international approaches to banking regulation has been paid. The main models and tools of prudential supervision of Islamic financial institutions-Islamic audit and Sharia financial supervision authority have been characterized. The main problems of implementation of international standards in the activities of organizations providing Islamic financial services, specific features and main directions of development of the system of regulation and supervision of Islamic banks in the context of harmonization of the Supervisory process of Islamic banks and international standards of banking supervision have been analysed.

The indicator-based method recommended by the Basel Committee is one of the most common approaches to identifying systemically important banks. National authorities often establish their own methodology by adding modern tools that, in their opinion, adequately capture systemic risk in their domestic economy. The paper shows that the updated methodology for assessing systemically important Ukrainian banks can be verified on publicly available data. The analysis confirms that the updated version of the National Bank’s assessment methodology is in line with those recommended by international banking institutions, but does not fully capture the current systemic risk factors. Systematization of literary and statistical sources indicates that one of the main sources of systemic risk in Ukraine is the establishment of a state monopoly in the banking market. Thus, the assessment methodology should be supplemented by instruments to evaluate the performance of the banking business. The indicator-based method and the minus one bank Z-score approach were tested to identify Ukrainian systemically important banks from 2010 to 2017.The loss of the leading role of PrivatBank in ensuring banking stability after the transition to state ownership since 2016, as well as the equalization of the systemic risk contribution of banks with state, foreign and domestic capital, was discovered. The study empirically confirms that Z-index, which combines the positive characteristics of the static asset return ratio and bankruptcy probability, can be used to determine the methodology as an indicator of the performance of systemically important banks, primarily state-owned banks.

The economic and financial crisis of the year 2008 highlighted the need for banking sector regulation via the creation of the banking union. The Bank Recovery and Resolution Directive (BRRD) represents an important milestone in the formation of the banking union. It is supposed inter alia to replace the existing practice of bailing out failing banks by the opposite principle of bail-in, which makes the bank recapitalized from the internal resources at the detriment of investors and creditors. However, the Italian solution of handling its failing banks took advantage of existing loopholes in the new regulatory system. Eventually, it went against the spirit of the new rules by deploying taxpayers’ money to deal with the banks’ failure. This article evaluates the Italian approach and contemplates the adequacy of the new rules-based system by comparing its potentially beneficial room for flexibility with alleged malfunction and unreliability. Finally, it discusses the potential impact of the Italian approach on the further process of completing the banking union, in particular the establishment of its last pillar, the common deposit guarantee scheme.

Maintaining proper financial stability of each banking institution is one of the main tasks facing the banking system of Ukraine. This enables operational control over the financial strength of banking activities.The purpose of the article is to develop recommendations on the operational control of financial stability of banking and to test them using banking institutions in Ukraine as an example.To execute operational control over the financial stability of banking, economic standards of banking regulation are grouped under the “at least” or “not exceeding” principle. To determine their change over time, Shewhart control charts are proposed.The recommendations were tested through the example of the Ukrainian banking institutions (with state, foreign and private capital). It was found out that in 2017–2019, the following three economic standards of banking regulations were not met: regulatory capital adequacy, high credit risk, and average investments; besides, there were two standards at the limit of control value: the ratio of regulatory capital to total assets and the maximum amount of credit risk per counterparty.To improve the financial status of banking institutions, it is recommended to take organizational and financial measures to change the average value of the relevant economic standards for banking regulation to a level that ensures financial stability.

Defined in article the role function of monitoring and its oversight component in managing improving the stability of development of the banking cluster financial system of the subject federation lies not only in the financial support continuity of the production process, but and in support target orientation of the organization of the regional economic complex on achieving planned economic and social outcomes, efficiency, use of resources, to enhance the resilience of the banking sector of the financial system, in surveillance of quantitative and qualitative characteristics of economic stability and security of banking activities.

The issues of prudential supervision ofIslamic financial institutes, including work of Islamic audit and Sharia Supervisory Board, are considered in the article. Besides, the main principles ofIslamic audit and its problems are given in the article. Conceptual issues of work ofSharia Supervisory Board used in supervisory practice are also analyzed here.

During 2013-2015 the Bank of Russia revoked the licenses of 211 credit institutions. In many cases, one of the reasons was the discovery of the facts essential unreliability of the accounting data. For the purpose of reporting distortions is the desire to look more attractive in the eyes of potential investors and customers, the reluctance to form additional reserves to cover possible risks, fear of disclosure of real flows, concealment of the so-called «balance holes», problems with capital and other. The Bank of Russia is a body of banking regulation and supervision over activities of credit organizations.

This paper captures advances in prudential regulation and supervision for challenger banks and fintech in the UK. It presents a critical analysis of the prudential supervisory approaches towards fintech. The focus is placed on fast-growing firms (FGFs), building on the review performed by the Prudential Regulation Authority (PRA) of the Bank of England (BoE) in 2019. Specifically, it comprises a critical examination of the underlying regulatory framework in relation to the robustness of stress testing practices, as part of the review of FGF risk management practices and the weakness identified in the Internal Capital Adequacy Assessment Process (ICAAP). The economic analysis of law comprises the underlying methodology, using economic theory to analyse regulation and its effectiveness regarding fintech regulation and supervision. Recommendations for enhancements towards supervisory practices about the prudential governance and management of FGFs and fintech are included, with advances to the underlying regulatory framework in the UK. Overall, this critical legal research examines the supervisory practices of FGFs and fintech in the UK, under the lens of prudential regulation and risk management approaches, focusing on the design, development and implementation of the stress testing tool and scenario practices.

The "too big to fail" institutions are a widespread concern, especially in the financial world. Their failure can create severe economic downturns and social turmoil. In past bank failures, governments intervened with public funds to save such institutions from collapse to avoid economic downturns. Since, measures have been put in place to prevent bank failures and limit the utilisation of public funds. However, failures cannot be prevented and risks of affecting the economy are always present in the case of too big to fail institutions. This article explores the possibilities offered by recent advancements in the fields of Big Data and Artificial Intelligence, widely implemented by the financial institutions themselves, as tools to be used by authorities in ending the too big to fail conundrum. The adequate implementation of these technological capabilities will contribute to the areas already targeted by governments – reducing the probability of failure and providing tools to limit negative externalities and spillover effects – and will also introduce a new capability that could address the too big to fail matter. Since financial institutions are, in their essence, data hubs, now in a digitalised format, the possibilities to automate tasks and provide insight for decisions should address the issue. The actual transfer of assets and liabilities to institutions that can carry on the activity, currently need years to be handle:. Big Data and Artificial Intelligence technologies could make such operations a matter of hours or days. [ABSTRACT FROM AUTHOR]

The COVID-19 pandemic was a challenge for all aspects of life. Besides others, this includes health and social life as well as the overall state of the economy. To contain the spread of the coronavirus, governments throughout the world imposed temporary closures (lockdowns). The banking industry was affected by these lockdowns in multiple ways. To mitigate the potential negative impact of the COVID-19 pandemic on banks, the national and international supervisory authorities passed comprehensive measures. The aim of this paper is to highlight the main regulatory facilitations for German banks by focussing on measures regarding capital buffers and the operating areas of banks. Besides this, an expert study was conducted to analyse how the measures are perceived by German banks and to develop recommendations for action. The results of the study show that the measures have mainly had a signalling effect on banks. However, measures like the easing of capital requirements are also related to higher risks for the banks. The results illustrate that most banks have hesitated in taking these additional risks if they can avoid them, with other measures like general moratoria on payments considered helpful. Overall, the results demonstrated that the experts prefer a cautious approach to using the easing measures. [ABSTRACT FROM AUTHOR]

In recent years, the internal governance issues in the banking sector have received increased attention on the international level. One of the global financial crisis causes was banks’ weak and superficial internal governance practices. Before the financial crisis, banks have not effectively implemented the internal control mechanisms and risk management, because the goal of profit maximization prevailed and conditioned the banks managers to take the decisions with a high degree of risk. The European Banking Authority (EBA) is constantly concerned with issuing the best policies for an efficient banking supervision in the European countries. In this context, EBA included the internal governance assessment as a component of the Supervisory Review and Evaluation Process (SREP). The difference between the previous researches on the internal governance topic and the present article is the fact that it analyzes the peculiarities of the internal governance assessment during the SREP process, performed by the supervisory authority. The supervisory authority task is to assess whether or not a bank’s internal governance arrangements are adequate for and correspond to the institution’s risk profile, business model, size and complexity. The score assigned following the internal governance assessment expresses the supervisory authority view on the adequacy of the institution’s internal governance arrangements and institution wide controls.

The modern challenges and realities of development of the domestic financial market are required the presence of a normatively-fixed method of evaluating the effectiveness of the measures and the tools which implemented by the mega-regulator in the course of the supervisory process over the activities of the financial intermediaries. Despite the obvious need, this issue has not yet been resolved at the legislative level and is not sufficiently covered in the works of domestic economists. In a number of foreign countries (for example, in the Netherlands), financial market regulators have long been assessing the effectiveness of financial regulation and supervision processes, and the Supervisory Intensity and Effictiveness Group under the Financial Stability Board is currently actively developing evaluating the effectiveness of the financial supervision and regulation. The purpose of this article is to develop criteria for evaluating the effectiveness of the supervisory process of the Bank of Russia and a methodology for evaluating their implementation. In the article the concept and key components of the effectiveness of supervision in the Russian financial market are discussed; the author's criteria for the effectiveness of the supervisory process of the Bank of Russia is developed and the matrix proposed by the author to assess their implementation is presented. Based on the application of this author's approach, the effectiveness of the modern supervisory process of the megaregulator on the financial market of Russia for the period from 2015 to 2017 has been evaluated. In the course of the study, methods of deduction, mathematical, statistical, logical, and expert analysis were used, which allowed us to obtain results that are verifiable in practice and to develop a set of proposals for improving the modern supervisory process of the Bank of Russia on the financial market.

In recent decades there has been a dynamic process of political and economic liberalization, internationalization and globalization. Quite normally business development follows the general trend of the "opening" of markets, economic diffusion processes can be found at all levels, and the "intertwining" of national and foreign capital is considered natural course of economic development. The role of the banking sector in the development of any economy is undoubtedly important, but the whole process would not have been possible without the involvement of banks. In the light of the above, given the current economic crisis realities, given the financial sector in the creation of today's economic reality, the main goal of the study is to outline the challenges facing the banking supervision and bank accounts in relation to the sustainable development of the sector and national economy.

The article studies the most widely used tools of banking supervision, such as macro-economic control, distributive and structural control, finance sanitation. Among regulation tools of central banks a special role is attributed to normative and legal acts, methodological and preventive tools. The authors propose to divide all tools of banking supervision into two big categories: control and supervision (key ones) and tools of regulation (extra ones). One of the most important analytical tools meant to provide estimation of potential losses of credit organizations in case of economic recessions is macro-prudential stress-testing. It was grounded that tools of banking supervision and regulation cannot always allow us to reach a goal set by central banks of post-soviet countries, i.e. to lower the inflation rate. Cut in Inflation rate should not be the main goal of regulators. During the transition period in economy central banks should resolve wider range of tasks and use tools of banking supervision and regulation.

The article is devoted to the international experience of bank supervision. Namely, it is about the main principles of banking regulation in the United States. It describes the supervisory practice in different countries and the fundamental problem of the Russian banking sector.

The article analyzes the dynamics of assets of the banking sector of the Russian Federation and further impact on the efficiency of contact supervision of the Bank of Russia. Provides information about the change of the number of credit institutions number of operating credit institutions in Russia, the main indicators of the banking sector of the Russian Federation, data on the structure and dynamics of assets of credit institutions. The author provides an analysis on changes of the main indicators of the banking sector.

We argue that the evolving preferences and power resources of large cross-border banks help explain the crucial political moves to European banking union. As they became larger and more European, these banks benefited from the supranationalization of supervision through reduced compliance costs and the effective opening of European markets. The political divergence in the interests of large international banks and small national ones eventually caused the German and the French governments' change of position in intergovernmental bargaining. Once in place, banking union accelerated balance sheet consolidation to the benefit of large banks that took over their weaker competitors. [ABSTRACT FROM AUTHOR]

AnaCredit is a multi-purpose shared data set containing loan-by-loan information on credit extended by credit institutions to companies and other legal entities, and it is conceived primarily as a common granular analytical credit database, shared between the Eurosystem members and comprising input data from all Member States whose currency is the euro; AnaCredit is open to non-euro Member States. However, in order to join AnaCredit, the non-euro Member States must meet a series of requirements set out by the European Central Bank. This article focuses on the legal challenges regarding the lack compatibility between these mandatory preconditions established by the European Central Bank, on the one hand, and the European Union primary law, on the other hand. [ABSTRACT FROM AUTHOR]

There is growing recognition that natural disasters and severe weather-related events pose risks that can potentially and unintentionally affect the financial performance of the banking system. This study provides further indication that severe weather conditions have an impact on the financial performance of smaller banking units. The paper first constructs a regional quarterly rainfall damage index (RDI) based on data from weather stations across the country. A regional branch-level database from supervisory reports is then compiled based on 11,000 banking units from the Bangko Sentral’s (BSP) Branch Regional Information System (BRIS). Using the dynamic panel generalized method of moments (GMM), we find evidence of a deterioration in branch-level loan growth and loan quality as savings and time deposit liabilities contract and nonperforming loans surge following extreme rainfall events from 2014 to 2018. These are particularly evident in regions most vulnerable to severe rainfall episodes and to branches of universal and commercial banks as well as those of rural and cooperative banks. However, the overall negative impact on profitability seems to eventually taper off. These findings are robust across different specifications and alternative estimation methods such as fixed effects and panel vector autoregression estimations.

The article is devoted to the problem of financial supervision system compliance in the countries with the international principles and the best world practices. The main international principles of effective banking supervision, insurance and regulation of the securities market are analyzed. We developed a scientific and methodological approach to assessing the country's financial supervision compliance with international principles, which allows to determine the dynamics of development and improvement of financial supervision in banking, insurance and securities segments of the financial sector. A scale for translating financial supervisory compliance assessments into international principles was developed and statistical tools of arithmetic weighted and geometric mean were used to summarize the implementation of Core Principles for Effective Banking Supervision, Insurance Core Principles and Objectives and Principles of Securities Regulation. The average level the implementation of each of the principles of Effective Banking Supervision, Insurance Core Principles and Objectives and Principles of Securities Regulation is determined. Banking Supervision has been assessed to international principles in countries such as Austria, Bulgaria, Canada, Germany, Denmark, United Kingdom, Georgia, Hong Kong, Republic of Korea, Moldova, New Zealand, Russian Federation, Turkey, United States of America, South Africa, Insurance Supervision — Canada, Denmark, Hong Kong, Ireland, New Zealand, Turkey, United States of America, South Africa, securities market surveillance and financial supervision in general — Canada, Hong Kong, United States of America, South Africa. The work identifies key areas of modern and innovative development of the financial supervision system. The paper identifies key areas of modern and innovative development of the financial supervision. Our results showed that increasing the compliance of financial supervision with international standards can be ensured primarily through the introduction of risk-oriented financial supervision, improvement of corporate governance and disclosure of financial reporting by financial intermediaries.

Copyright of Journal of Financial, Accounting & Managerial Studies is the property of Journal of Financial, Accounting & Managerial Studies and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The traditional model of systematic amortization over its useful life was replaced by the annual application of an impairment test, with the intention of correcting the problems of the lack of relevance and difficulty in estimating said useful life of the previous regulatory framework. The aim of this study is to investigate whether the application of the impairment test between 2005 and 2015 in the main European banks has overcome these problems or whether, on the contrary, its application by managers has been discretionary, opportunistic and arbitrary, presenting, as a result, artificially inflated earnings. Our results obtained show that systematic amortisation has been replaced by opportunistic impairment, which does not reflect the economic conditions underlying the financial activity of the main European banks, which gives rise to less relevant financial information and possible harmful pro-cyclical effects. [ABSTRACT FROM AUTHOR]

Operational risks have become increasingly important for banks, especially against the background of growing IT dependency and the increasing complexity of their activities. Further-more, the corona pandemic contributed to the increased risk potential. Therefore, banks have to back these risks with own funds. There are currently three measurement approaches for determining the capital requirements for operational risk. In recent years, and especially during the Great Financial Crisis of 2007/2008, however, some of the weaknesses inherent in these approaches have become apparent. Thus, the Basel Committee on Banking Supervision revised the current capital framework. Therefore, this article examines the various measurement approaches, addresses inherent weaknesses and moreover, presents the future measurement approach developed by the supervisory authorities. [ABSTRACT FROM AUTHOR]

Risk analysis and scenario testing are two of the core activities carried out by economists at central banks. With the increasing adoption of machine learning to enhance decision-support systems, and the amount of collected data spiking, institutions provide countless use-cases for the application of these innovative technologies. Consequently, in recent years, the term sup-tech has entered the financial jargon and is here to stay. In this paper, we address risk assessment from a central bank’s perspective. The uptrending number of involved banks and institutions raises the necessity of a standardised risk methodology. For that reason, we adopted the Risk Assessment Methodology (RAS), the quantitative pillar from the Supervisory Review and Evaluation Process (SREP). Based on real-world supervisory data from the Portuguese banking sector, from March 2014 until August 2021, we successfully model the supervisory risk assessment process, in its quantitative approach by the RAS. Our findings and the resulting model are proposed as an Early Warning System that can support supervisors in their day-to-day tasks, as well as within the SREP process.

The first judgement of the General Court (EU) pertaining to the Single Supervision Mechanism (SSM) raised an issue concerning the source of the shared supervisory powers in the system of EU prudential supervision. In the General Court’s view, the SSM Regulation conferred on the European Central Bank (ECB) exclusive powers to carry out specific prudential supervisory tasks vis-à-vis all euro area credit institutions (significant and less significant). At the same time, the ECB’s national counterparts assist the former in implementing its supervisory tasks vis-à-vis less significant credit institutions. We argue that such a scheme requires a clear accountability relationship also between the ECB and the national competent authorities (NCAs), something that is not fully fledged in the current legal framework.

The subject of considerations is the legal issue of the optimal model of supervision over the functioning of credit institutions. Normative regulation models in selected European countries have been presented with particular reference to the solutions applied in German legislation. Two basic banking supervision systems were identified: institutional type and functional type. Institutional type supervision is exercised by one supervisory institution which deals with irregularities in the functioning of all entities performing bank activities. It has been adopted in Switzerland and in Poland. In this system, the supervision is entrusted to one entity. Functional supervision is exercised, by several supervisory institutions acting jointly, each has their unique statutory competences. The experience of the recent financial crisis indicates a greater effectiveness of the first type of supervision and the need to deepen further the cooperation between national supervision in cross-border activities.

As is well known, during last times the ECB has undertook new powers in terms of a prudential supervision upon credit institutions. This has meant, probably, a more direct impact on particulars regarding the classic monetary function. From the democratic logic, and considering the high level of independence by the institution, the new functions as banking supervisor are to be accompanied with democratic supervisory mechanisms that let BCE to be accountable for its actions, explaining the reasons for its activities or the grounds upon which its decisions are adopted.

The sustainable, adequate, security and efficient operation of a central bank depends on many internal and external factors. New trends, challenges, and threats (which are associated with European integration, globalization, etc.) affect the sustainable, efficient, and security operations of the ECB, which can lead to economic or financial crises. Therefore, in the current situation, the concept of the Central Bank's activities, its legal status and the institution of monetary policy should change completely. The purpose of this research was as follows: 1) to determine economic and legal aspects of sustainable, efficient and safe operation of the ECB, with a reflection on innovation and analysis of modern de lege lata trends to ensure sustainable development of the EU, 2) to prepare conclusions and to identify positive and negative aspects that affect the activities of the Central Bank, 3) on the basis of scientific and practical de lege lata research and its application, to develop de lege ferenda to improve the activities of the European System of Central Banks, the European Central Bank, national central banks and other institutions of the European Union. [ABSTRACT FROM AUTHOR]

Since 2014, the ECB has been competent for the granting and withdrawal of banking licences in the euro area. On 5 November 2019, the Court of Justice ruled on three appeals from an order of the General Court on the admissibility of an action for annulment against such a withdrawal. In addition to procedural oddities, the case is interesting from the substantive point of view: it constitutes an excursion of European law into an area traditionally thought to be governed exclusively by national law, namely the representation of legal persons incorporated nationally. The present article argues that this was motivated by a dilemma: it was necessary to avoid an outcome which would be unacceptable from a fundamental rights and effective judicial review perspective; this could be achieved by either undertaking such an excursion, or by deviating from established case law on non-addressee standing under the Plaumann formula. The two courts took different views as to which was the lesser of these two evils. On a more general scale, the judgment demonstrates that, where the ECB--unique among EU Institutions--applies national law, the Union courts will not shy away from superimposing European fundamental rights over such national laws. [ABSTRACT FROM AUTHOR]