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The asset management industry is becoming a systemic feature of global finance, yet has evaded regulators' efforts to designate its largest firms as systemically important institutions. How has this been achieved? We use as our example BlackRock's running commentary on the evolving plans of both prudential (banking) and securities (market) regulators in the period from 2008 to 2018. We show how asset managers engaged in successful recognitional politics, based on a decade-long struggle to influence how they were seen across the regulatory divide. James C. Scott's most recent thoughts on legibility codes provide us with our conceptual language of shape-shifters and chameleons. Two distinct strategies were simultaneously in play. As a shape-shifter, BlackRock repeatedly changed form in its self-presentation to prudential regulators concerned with systemic risk, so they could not be certain what they were looking at. As a chameleon, it invited securities regulators to maintain their authority over the asset management industry, so it could increasingly blend into the supposedly safe category of market-based finance. [ABSTRACT FROM AUTHOR]

The article analyzes genesis of scientific cognition of the prudential element in banking regulation. Principles of prudential regulation were fixed in the Basel committee on bank supervision and were aimed at minimization of system risk in the banking sphere and certain credit organizations, as well as provision of depositors’ security. The authors showed stages of prudential regulation development, within the frames of which conceptual and essential parameters of the notion, its character and implementation mechanisms kept changing. Theoretical approaches to prudential regulation research that state the conceptual cut of the notion in academic discourse were studied; prudential regulation on macro- and micro-economic level was analyzed and specific character of the current standing of prudential regulation in banking sector was described.

In this paper, I analyze the joint design of capital requirements and fair value reporting rules for financial institutions with illiquid assets. I specifically examine how prudential regulation aimed at solving agency problems affects financial institutions' incentives to use Level 2 versus Level 3 fair value reporting, as well as financial stability. Crucially, Level 3 reporting allows financial institutions to use their private information, whereas Level 2 fair values are only measured with public information. Interestingly, my analysis shows regulators may leave to financial institutions the discretion to report illiquid assets at Level 2 or Level 3. Financial institutions then report at Level 3 only if they have good private information about the assets' quality. Moreover, prudential rules that only rely on Level 2 fair values may be efficient at solving agency problems within financial institutions but may also decrease financial stability. By contrast, prudential rules that leave to financial institutions the discretion to report illiquid assets at Level 2 or Level 3 while relaxing capital requirements may increase financial stability. This paper was accepted by Suraj Srinivasan, accounting. Funding: This work was supported by the H2020 European Research Council [Grant 669217]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2023.4692. [ABSTRACT FROM AUTHOR]

The establishment of the second pillar of the Banking Union (BU) unquestionably confirmed the social and economic significance of appropriate bank resolution and crisis management regimes as one of the core components of prudential frameworks. In this regard, the Croatian experience offers an intriguing case study in terms of institutional arrangements, regulatory approaches, and policy decisions that construct an appropriate resolution and crisis management regime in the context of a post-transition economy. Therefore, this paper examines bank resolution in Croatia from an evolutionary standpoint, focusing on economic complexities and institutional entrepreneurship as the primary drivers of the convergence of a crisis-forged system into a larger resolution and stabilisation framework represented by the BU’s Single Resolution Mechanism. Despite episodes of exceptional market disruptions, the paper identifies ‘success factors’ in banking sector restructuring, macroeconomic stabilisation, and institutional empowerment in Croatia through a qualitative, documentary analysis of a variety of primary and secondary sources. Furthermore, based on an analysis of actions taken in the resolution of ‘Sberbank’, the paper sheds light on recent issues in bank resolution governance within the broader BU framework.

The collapse of Genesis is the latest in a cascade of failures of crypto lenders. The last year has seen numerous major crypto lenders, such as Celsius, Voyager and BlockFi, going out of business in domino-like fashion. The failures have revealed the vulnerabilities of crypto-market lenders' business model, most notably the liquidity and maturity mismatches in their loan portfolios, and their markedly weak corporate governance. The present article explores avenues to regulate crypto lending within the framework of EU financial services regulation. It argues that crypto lenders should be taken as falling within the definition of credit institutions under EU law, and thus, as a result, should be subject to the stringent licensing and prudential requirements introduced by the Capital Requirements Directive and Regulation. Prudential regulation is one of the ways that have been suggested for the regulation of crypto-market operators, alongside the investor protection framework. Taking into account that crypto lenders easily operate on a cross-border basis and that prudential regulation is fully harmonized in the EU, we take an EU-wide perspective and focus our analysis on EU law, rather than member state laws. In addition, prudential regulation can deal with any systemic risk issues with which investor protection regulation cannot deal. However, in order to avoid moral hazard and not give investors the false impression that crypto lenders are safe too-big-to fail institutions, we suggest that crypto lenders should not enjoy the full protection of prudential regulations. In particular, they should not be offered lender of last resort support and they should not be allowed to subscribe into a deposit insurance scheme. Even though it is often said that crypto markets pose no risk to the regulated sector due to limited interconnectedness, it should be noted that due to the high leverage of crypto investors, the real risk to the regulated sector comes from the possibility of crypto investors massively liquidating their positions in other asset markets. [ABSTRACT FROM AUTHOR]

This paper proposes new risk measures by accurately estimating the components of solvency risk and focusing on prudential policy implementation. We use semi‐nonparametric statistics to model the stylised facts of the probability density functions, particularly the higher‐order moments of three variables: the solvency decline rate, the tier decline rate and the portfolio growth rate. The proposed measures allow the evaluation of the impact of expansionary monetary policy on the risk‐taking transmission channel and implementation of the minimum solvency ratios required by banking regulators based on the estimation of quantile risk metrics. Using a database of Colombian solvency indicators, we show that the liquidity injection measures employed in response to the COVID‐19 pandemic led to a significant increase in portfolio risk in the banking system. The proposed methodology is suitable for micro‐ and macroprudential regulation at different levels of portfolio risk aggregation. [ABSTRACT FROM AUTHOR]

Several major economies have already committed to achieving a carbon-neutral economy by 2050, in accordance with the Paris Agreement. The banking system in all countries has a key role to play in supporting the transition to a low-carbon economy, and academia has been researching the prudential regulation tools that will enable the incorporation of climate risk management into banking. However, no studies to date have attempted to systematize research on Climate-related Prudential Regulation Tools. This study conducts a systematic review of the English-language peer-reviewed literature produced on this topic in the period since the 2007–2008 financial crisis, revealing the state of the art and the research gaps. The thematic synthesis carried out in this study shows the experience of some countries in the implementation of these tools and the advancement of academic knowledge in this field. These findings can serve as a reference for the further development of a harmonized international framework to address climate risk in banking. Central banks are considering sustainable and responsible investment (SRI) in their agenda to align national financial systems towards internationally-agreed climate goals. The academic research community is also investigating how to integrate climate risk into the prudential regulation tools available to financial regulators. A concentration of research in developed countries, mainly in Europe, and a significant increase in the publication of studies has been observed in recent years. Scientific research has focused on five prudential regulatory tools: disclosure requirements, climate-related stress testing, differentiated capital requirements, targeted refinancing lines, and green finance guides and frameworks. Research gaps identified include green bubble, double materiality, interaction between policies, compound risks, banking governance, and small and medium-size enterprize (SME) banking. They are cross-cutting issues that could increase the body of knowledge on climate-related prudential regulation tools. [ABSTRACT FROM AUTHOR]

Scholarship on regulating global finance emphasizes the importance of national and bureaucratic interests, but less attention has been devoted to epistemic sources of regulatory conflict. We address this by analyzing the failure of regulators to agree tougher rules for large investment funds after the 2008 crisis. The article suggests this outcome was the result of epistemic contestation between prudential regulators and securities regulators, rooted in divergent interpretive "frames." We show that US and EU prudential regulators pushed for entity‐based regulation of investment funds by escalating the issue to global standard‐setting bodies. But this was successfully resisted by securities regulators that exercised epistemic authority through recursive practices—appeals to expertise, jurisdictional claims, and alliance building—to defend their transaction‐based approach. The article demonstrates how an interpretivist perspective can provide new insights into inter‐agency conflict and regulatory disputes in other policy fields. [ABSTRACT FROM AUTHOR]

The recent global financial crisis was caused, among others, by the interaction of micro and macro elements, so it is important for regulatory policies to cover these interactions as the objective is to decrease future crises or at least to minimize their effects. Macroprudential policies are very useful, but their main objective is not yet well highlighted and quantified, such as price stability in the case of monetary policy, for example. Regulators need to strike a balance between the micro and macro prudential approach to financial stability. The paper looks at the differences and similarities between micro-prudential and macro-prudential from the perspectives of financial regulation.

The paper investigates whether the institutional arrangements that determine the conduct of monetary and prudential policies influence policymakers' actions in pursuing their designated mandates. Employing recently developed dynamic heterogeneous panel methods and using data for 25 industrialized countries from 1960 to 2018, we empirically assess whether central banks' main objective of inflation stability is compromised when assigned with both policy mandates manifested as inflation bias. Our results show that, once we appropriately control for relevant policy and institutional factors, the separation of macroprudential regulation and monetary policy does not have a significant effect on inflation outcomes. [ABSTRACT FROM AUTHOR]

The establishment of the second pillar of the Banking Union (BU) unquestionably confirmed the social and economic significance of appropriate bank resolution and crisis management regimes as one of the core components of prudential frameworks. In this regard, the Croatian experience offers an intriguing case study in terms of institutional arrangements, regulatory approaches, and policy decisions that construct an appropriate resolution and crisis management regime in the context of a post-transition economy. Therefore, this paper examines bank resolution in Croatia from an evolutionary standpoint, focusing on economic complexities and institutional entrepreneurship as the primary drivers of the convergence of a crisis-forged system into a larger resolution and stabilisation framework represented by the BU's Single Resolution Mechanism. Despite episodes of exceptional market disruptions, the paper identifies 'success factors' in banking sector restructuring, macroeconomic stabilisation, and institutional empowerment in Croatia through a qualitative, documentary analysis of a variety of primary and secondary sources. Furthermore, based on an analysis of actions taken in the resolution of 'Sberbank', the paper sheds light on recent issues in bank resolution governance within the broader BU framework. [ABSTRACT FROM AUTHOR]

We develop a model in which accounting information and prudential regulation interact to affect banks' incentives to originate loans. Prudential regulators impose capital requirements to prevent banks from taking excessive risk. However, regulators cannot commit to ex ante efficient intervention and, instead, respond to ex post accounting information. We show that capital requirements and accounting measurement are substitutes when considered separately. By contrast, when considered jointly, accounting measurement and capital requirements are complementary tools that affect the level and efficiency of credit decisions. Comparative statics link capital requirements, quality of accounting information, and regulatory intervention to credit market conditions. An upshot of our analysis is that by appropriately optimizing the information from expected loss models, prudential regulators may design looser capital requirements to spur more bank lending. JEL Classifications: G21; G28; M41; M48. [ABSTRACT FROM AUTHOR]

The article reflects modern approaches to the organization and implementation of prudential regulation in the sphere of insurance. From a scientific point, the expediency of taking the State regulatory measures to increase the business activity of participants in the insurance process and enhance the financial capacity of companies to fulfill their contractual obligations is specified. The article is aimed at a theoretical-methodological substantiation of prudential regulation processes in the insurance market of Ukraine. In the course of the research, a rather positive dynamics of the development of key indexers of the insurance services market for 2016-2020 is identified. This applies, first of all, to the indicators of total assets and the condition of formed insurance reserves, the identified tendency was observed against the background of a significant reduction in insurance companies in the market. Simultaneously, it is found that as of the beginning of 2021, three-quarters of insurance companies comply with solvency requirements and financial standards. It is emphasized that the current conditions of risk-causing market environment require the implementation of balanced regulatory and supervisory activities in the insurance market in accordance with the Pan-European requirements of «Solvency I» and «Solvency II». A critical analysis of key articles of the Law of Ukraine «On Insurance» (2021) on ensuring solvency and investment activity testifies to their innovative nature and direction of integration of the national market into the European insurance space. The authors’ own vision of prudential regulation is formulated, which consists in systematic coordination of actions of both the State-based and non-state institutions in the insurance market to effectively neutralize the possible risks associated with the livelihoods of society. A conceptual vision of further development of prudential regulation in Ukraine is defined, which is based on three following components: increasing transparency in the activities of insurance companies, increasing requirements for the solvency of insurers as a guarantee of their fulfillment of contractual obligations, improving the corporate governance system as a basis for ensuring the competitiveness of the insurer in the market. Prospects for further research are the digitalization of regulatory processes in the insurance market of Ukraine

Most of prudential regulations apply to national institutions while, in practice, banks operate at the global level, generating international banking flows which are not comprehensively captured by policies with a domestic remit. This may give rise to spillovers, i.e., effects not considered ex ante in the objectives and/or constraints of authorities in charge of prudential policy, the effectiveness of which may be harmed. Using BIS data on foreign bank lending over a large sample of countries, we investigate international spillovers from French prudential policies. Overall, we show that French prudential policies entail a reduction in foreign banks' lending to French residents. Yet some measures may lead to undesired leakages that potentially undermine authorities' goals: foreign bank affiliates' exposure to France rose by 1.1% (1.9 Bn USD) on average over 2011–17 owing to the implementation of Basel capital requirements. [ABSTRACT FROM AUTHOR]

The bailouts extended to large, complex and interconnected financial conglomerates labelled "Too Big To Fail" (TBTF), especially during the 2008 GFC, led to extensive regulatory intervention through the Basel Global Systemically Important Banks Framework (G-SIB Framework) and the Basel Domestic Systemically Important Banks Framework (D-SIB Framework), respectively. Against the backdrop of the D-SIB Framework this contribution explores recent developments in South Africa to address the identification, designation and stringent prudential regulation of systemically important banks in South Africa, herein referred to as "SIFI-banks ". [ABSTRACT FROM AUTHOR]

Until recently banks were not subject to detailed prudential regulation. This article seeks to explain why, historically, that changed. The first part argues that regulation has been driven by banking crises. The second part considers the theory of banking regulation, concluding that existing theories have limited explanatory power and that further theoretical analysis is needed for regulation to achieve its goals. [ABSTRACT FROM AUTHOR]

Regulatory actions for short-term debt-relief during the Covid-19 pandemic are facilitating a significant level of indebtedness. We argue that regulators, in leaving the banking sector to manage small business and consumer debtors in 'tailored arrangements', risk allowing financial welfare goals to be unmet. Financial welfare goals are important to the Financial Conduct Authority's (FCA) consumer protection objective and give substantive meaning to the long-term financial stability objective of the Prudential Regulation Authority (PRA). Although the struggles with debt on the part of small and medium-sized businesses and households are not capable of complete resolution by financial regulators, who are constrained by their statutory mandates, we argue that the PRA and FCA should establish a coordinated supervisory framework of 'tailored supervision' for banks' 'tailored arrangements' with their debtors. This proposal allows both regulators to address to an extent the needs of unsophisticated post-pandemic debtors and meet their objectives in a joined-up and holistic manner. [ABSTRACT FROM AUTHOR]

• Uses a spatial econometric approach to measure Europe's foreign geopolitical risk. • Considers foreign geopolitical risks from proximate countries and trading partners. • The risks impair financial stability through energy inflation and capital flight. • This effect varies across countries with different incomes and financial structures. • Recommends incorporating foreign geopolitical risk into prudential regulation. Using a spatial econometric approach, we measure 28 European countries' foreign geopolitical risks (GPR) from their proximate countries, export destinations, and import origins from January 1985 to January 2024 at a monthly frequency. Based on difference GMM estimation on dynamic panel data model, we find that the foreign GPRs increase Europe's financial instability through potential channels of surging energy inflation and capital flight to the U.S. Compared with high-income countries with a bank-based financial system, low-income countries with a market-based financial system are more fragile to the foreign GPRs. These findings can help European financial authorities improve prudential regulation policies. [ABSTRACT FROM AUTHOR]

The prospects of deglobalisation have been discussed in relation to international trade and finance, and this article queries how recent geopolitical risks may affect the shape of international financial regulation. The article critically presents an examination of international financial globalisation that has already been chequered for a long time, and argues that there is a strong likelihood of no or incremental change to international financial regulation due to the chequered nature of financial globalisation it already supports. However, international financial regulatory bodies can be affected if individual jurisdictions that are members of international organisations make more pronounced political responses. Although the network of experts underlying international financial regulation have technocratised issues to a significant extent, the politicisation of issues has always persisted. The article therefore addresses the potential for scenarios of more dramatic and turbulent change in international financial regulation and sketches the broad contours of such possibilities. [ABSTRACT FROM AUTHOR]

Copyright of Problems of Economy is the property of Research Centre for Industrial Developmen Problems of Nas 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 drastic banking reform within Central and Eastern Europe following the collapse of the Soviet Union provides an ideal quasi-experimental design to examine the causal effects of institutional development on accounting quality (AQ). We find that banking reform spurs significant improvement in predictive power of earnings and reductions in earnings smoothing, earnings-inflating discretionary provisions, and avoidance of reporting losses. These effects hold under alternative model specifications and after considering concurrent institutional developments. In contrast, corporate reform shows no such effects, refuting the alternative explanation that unobserved factors affect both reform speed in general and the quality of financial reporting. We further identify four specific reformative actions that are integral to the drastic banking reform process where prudential regulation contributes the most to the observed AQ improvement. It supports the conjecture that banking reform improves AQ by reducing banks' risk-taking behaviors and, as a result, their motive behind accounting manipulation. JEL Classifications: G21: G28; K20; M40; M48. [ABSTRACT FROM AUTHOR]

The recent global financial crisis was caused, among others, by the interaction of micro and macro elements, so it is important for regulatory policies to cover these interactions as the objective is to decrease future crises or at least to minimize their effects. Macroprudential policies are very useful, but their main objective is not yet well highlighted and quantified, such as price stability in the case of monetary policy, for example. Regulators need to strike a balance between the micro and macro prudential approach to financial stability. The paper looks at the differences and similarities between micro-prudential and macro-prudential from the perspectives of financial regulation. [ABSTRACT FROM AUTHOR]

The article is devoted to the problems of the new standard of net stable financing (NSFR) implementation in the practice of the Ukrainian banking sphere. In a whole, the article examines the motives and preconditions for the long-term liquidity ratio introduction and the main advantages that its application by domestic banks should bring. Additionally, more attention is paid to the warnings of economists about the possible negative consequences of further tightening the requirements for the bank liquidity level. Among the main risks of the NSFR ratio introduction are the reduction of credit programs by banks, which will negatively affect the economy, reduction of the Ukrainian banking institutions profitability, as well as the problem of ensuring a sufficient level of liquid investment in underdeveloped financial markets in Ukraine. Moreover, our research has shown that there is no clear pattern between the NSFR ratio implementation and changes in the volume of lending and investment by Ukrainian banking institutions. So, to say, this does not give grounds to claim that in the future compliance with the new liquidity requirements will have a negative impact on lending or profitability of the domestic banking sector. Furthermore, compliance with both NSFR and LCR liquidity ratios since their introduction into Ukrainian banking practice was also analyzed. It is shown that the Ukrainian banking market suffers from superliquidity, which, although provides high financial stability, significantly limits banks potential profitability. Also, the findings of American researchers that large banks tend to adhere to lower values of the NSFR ratio than smaller banking institutions are further researched. So, these conclusions are not true for the Ukrainian banking sector. To sum up, the assessment of future final transformations of regulatory requirements on liquidity and capital adequacy of Ukrainian banks was carried out.

Copyright of Journal of Research in Finance & Accounting is the property of Journal of Research in Finance & Accounting 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.)

By the late 1980s, most sub-Saharan African (SSA) countries had undertaken policy reforms to abolish financial sector controls. While studies have produced several liberalization indices, available measures are limited in scope and time coverage. The purpose of this research is to address this limitation by constructing a new set of indicators that tracks the magnitude, pace, and timing of reform aspects in 26 countries between 1986 and 2016. The paper uses questions and coding rules from a framework developed by Detragiache, Abiad, and Tressel (2008) to collect and analyse data on seven liberalization policies: credit controls, interest rate controls, entry barriers, state ownership of banks, capital account restrictions, prudential regulation and supervision, and securities market policy. Results indicate that interest rate liberalization is the most advanced dimension, followed by the abolition of entry restrictions. The least advanced dimension is bank supervision and prudential regulation. An aggregate liberalization index constructed using principal component analysis (PCA) confirms advancements in financial liberalization over time. This study is significant as it provides indicators critical for policy formulation in developing economies whose performance hinges on sufficiently developed and stable financial sectors. The study recommends implementing further reforms to update and modernise prudential regulation and supervision of banks in line with good governance. [ABSTRACT FROM AUTHOR]

Changing the economy to meet the goals posed by the Paris Agreement implies a financial system aligned to this end. This debate also involves a reconsideration of aims and tools of banking regulation although, for now, the discussion is still not very operational. In a previous work we introduced the 'environment-risk weighted assets' to internalize the pollution risk of the borrower that here we expand empirically to calculate the 'external costs footprint' of Italian corporate lending and to cover virtually every part of banks' business. Moreover, we analyse whether our proposal is aligned to the European Union taxonomy on environmentally sustainable activities. We show that our framework can help to put on a working track the discussion on banking regulation for sustainable finance. [ABSTRACT FROM AUTHOR]

In numerous Central and Eastern European (CEE) countries, the global financial crisis as well as the unpegging of the foreign exchange rate of the Swiss franc (CHF) against the euro amplified the repayment troubles of households with the outstanding CHF-linked debt. In Croatia, the CHF loans were approved mainly as mortgages to unprotected and subprime household borrowers without sufficient credit capacity for long-term euro-linked loans, which also contained a possibility of an incremental interest rate change, i.e., the so-called administrative interest rate. This article aims to disclose the reasons behind the credit boom of these loans, the unsustainable CHF debt hardship that the household sector consequently faced, and how it was/could have been resolved, with the Croatian banking sector at the center of the research. Although the CHF case of Croatia has some specificities concerning the prudential regulation and government-sponsored loan conversion, the findings about the supply and demand determinants of the CHF credit boom, as well as a critical assessment of the Croatian government and central bank interventions, might be useful for timely noticing universal threats from the exotic currency-linked loans for the systemic risk and financial stability, and for minimizing the negative externalities from probable debt relief measures. Based on the descriptive and univariate statistics conducted on Bloomberg and the Croatian National Bank (CNB) data, it was found that interest rate differentials and carry trading behavior were the main reasons for the rapid CHF credit growth in Croatia. Nevertheless, according to the financial experts' opinions obtained via a questionnaire survey, and the court verdicts reached since, the financial consumer protection when contracting these loans was severely violated, which implies that the central bank must enhance its consumer protection role. By adopting a single-country and holistic approach, this is the first paper that deals with the socioeconomic dynamic of the CHF credit default issues in Croatia, which might be interesting as a case study or for making comparison with other CEE countries that have been coping with negative consequences of Swiss francization. [ABSTRACT FROM AUTHOR]

Basel III introduced unweighted capital standard and new regulatory liquidity standards to complement the revised risk-weighted capital requirements. This change in banking sector regulation raised questions on how the capital and liquidity requirements interact and how they should be jointly treated. In the paper, we assess how a regulatory and a subsequent economic shock, and banks' subsequent response to it, affects compliance with the four regulatory requirements. We find that the capital and liquidity requirements can act as both, substitutes and complements, depending on the adjustment strategy banks choose to react to these shocks. We assert that to be able to properly calibrate macroprudential policy measures such as the counter-cyclical capital buffer, it is vital for macroprudential authorities to look at the initial levels of the other required ratios as well as to monitor banks' subsequent response. [ABSTRACT FROM AUTHOR]

Copyright of Revue Economique is the property of Fondation Nationale des Sciences Politiques 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.)

La crisi finanziaria del 2008 ha determinato un ripensamento di molti aspetti della vigilanza prudenziale. È, in particolare emerso che la ponderazione degli attivi non era in grado di coglierne l’effettiva rischiosità, che era calcolata in via indiretta, ad esempio attraverso il rating. Ciò ha favorito il circolo vizioso tra crescita dei volumi creditizi e crescita della loro rischiosità. Si propone un metodo alternativo di ponderazione (“profit weighted assets”) usando il profitto effettivo di un determinato attivo, individuando anche una condizione di neutralità della ponderazione rispetto alla rischiosità, in grado di evitare incentivi regolamentari distorti alle banche. Si discutono le modalità di creazione operativa e possibili sviluppi dello strumento. The 2008 financial crisis led to a rethinking of many aspects of prudential supervision. In particular, it emerged that the weighting of the assets was not able to grasp the effectiveness of their risk, which was measured indirectly, for example through their rating. This has favored the vicious circle between the growth of credit volumes and the growth of their riskiness. We propose an alternative weighting method (“profit-weighted assets”) using the actual profit of a given asset, also identifying a condition of neutrality of risk weighting, able to avoid distorted regulatory incentives to banks. We also discuss how to develop concretely the tool and its possible refinements. JEL codes: G28

We analyze the design and impact of bank regulation using a dynamic structural framework. The optimal regulatory policy combines a target capital requirement, the mitigation of underinvestment, an intervention capital requirement to control inefficient risk taking, and recapitalization of distressed banks. The optimal target and intervention capital requirements from our structural estimation are consistent with the substantially higher capital requirements proposed in Basel III and together achieve most of the regulatory benefits by alleviating underinvestment and asset substitution. They are interdependent and respond differently to banks' asset characteristics, thereby suggesting that regulatory policies should be carefully tuned to the economic environment. This paper was accepted by Kay Giesecke, finance. [ABSTRACT FROM AUTHOR]

Copyright of Moneta e Credito is the property of Associazione Economia Civile 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.)

This paper explores the interaction between monetary policy and prudential regulation in an agent-based modeling framework. Firms borrow funds from the banking system in an economy regulated by a central bank. The central bank carries out monetary policy, by setting the interest rate, and prudential regulation, by establishing the banking capital requirement. Different combinations of interest rate rule and capital requirement rule are evaluated with respect to both macroeconomic and financial stability. Several relevant policy implications were drawn. First, the efficacy of a given capital requirement rule or interest rate rule depends on the specification of the rule of the other type it is combined with. More precisely, less aggressive interest rate rules perform better when the range of variation of the capital requirement is narrower. Second, interest rate smoothing is more effective than the other interest rate rules assessed, as it outperforms those other rules with respect to financial stability and macroeconomic stability. Third, there is no tradeoff between financial and macroeconomic stability associated with a variation of either the capital requirement or the smoothing interest rate parameter. Finally, our results reinforce the cautionary finding of other studies regarding how output can be ravaged by a low inflation targeting. [ABSTRACT FROM AUTHOR]

• Financial liberalization and years since last regulatory reforms increase banking crisis vulnerability. • Financial liberalization- banking instability (crisis) link depends largely on the regulatory framework updating. • Regulatory delays- banking instability (crisis) relationship depends on the level of financial liberalization. • The relationship between financial liberalization and banking system vulnerability can be illustrated by a U-Shaped relationship according the number of years since last regulatory reforms. Similarly, the link between years since the last reform and banking system situation can be estimated by a U-Shaped curve depending on the level of financial liberalization. This paper aims at bringing new insights concerning the effect of financial reforms on banking system vulnerability. We show that the link between financial liberalization and banking crisis depends on the number of years since last regulatory reforms. Similarly, we show that updating regulations indirectly affect banking crisis according to the financial liberalization level. Then, we show that banking crisis can be largely explained by a gap between financial innovations and regulation update on a sample of 49 developed and developing countries from 1980 to 2010. Our empirical evidence supports that the regulatory environment is more important in developed countries as it reduces banking fragility perhaps because of highly-risky exchanged financial products. The effect of financial liberalization depends largely on the number of years since last reform. However, destabilizing effect of financial liberalization in developing countries cannot be neutralized by updating regulations and gets more obvious as regulations become older. [ABSTRACT FROM AUTHOR]

This study investigates the effect of prudential regulation on banks' performance in Nigeria. Adopting the public interest theoretical foundation and a system generalized method of moment (GMM) with an un-balanced data, a panel data for twenty four banks covering eight years, between January 2007 and December 2015, was carried out. The paper controls for fixed-effects in order to take care of unobserved factors that differ between banks though constant over time. The results show a weak evidence of prudential measures impacting banks' performance in the banking system. Apart from its lag value in the previous quarter indicating a substantial impact, the performance of the banking sector was marginally affected by the various prudential measures adopted in the study. This development suggests that regulatory measures adopted by the regulatory agencies in Nigeria need to be strengthened for greater impact on banks' performance. [ABSTRACT FROM AUTHOR]

This article is based on the debate on the impact of prudential regulation and banking supervision on the rise of financial instability in South East Asian Countries. Financial liberalization has rapidly accelerated the international financial integration of these countries and openness to external financial markets. This result drove the economic and financial situation accompanied by a financial disruption that turned into banking or liquidity crises, including a bank rush. In this sense, the spread of recent financial instability is accelerated in an environment of liberalization and financial globalization characterized by financial and institutional fragility or poor banking governance. [ABSTRACT FROM AUTHOR]