By Heidi Mandanis Schooner, Michael W. Taylor
Its specialise in the prudential, worldwide legislation of economic associations drives this book's distinct exploration of global coverage principles. Integrating idea, background, and coverage debates, it presents a high-level, strategic remedy of the law of worldwide banking. With finely concentrated definitions and an intuitive scope, the authors pay specific awareness to the overseas criteria set by means of our bodies corresponding to the Basel Committe on Banking Supervision and the eu Union. By starting with the most justifications for the prudential rules of banks and concluding in 2009, after regulators had proposed major options to the crash, this lucid and interesting account of the rules, guidelines, and legislation concerning the legislation of foreign banking explains why and the way governments paintings so demanding on a convergence of ideas and regulations.
* Defines the over-arching coverage ideas of capital regulation
* Explores major justifications for the prudent legislation of banks
* Discusses the 2007-2009 monetary predicament and the following new release of foreign criteria of monetary establishment legislation
* Examines instruments for making sure the sufficient supervision of a company that operates throughout all time zones
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Extra info for Global Bank Regulation: Principles and Policies
Surely, the argument runs, depositors might be able to keep a close watch on a bank’s activities and thereby to ensure that there is no incentive for other depositors to engage in runs. The problem is that, in contrast to most other types of firms that tend to have only relatively few creditors, banks fund themselves with a large number of comparatively small deposits. Economic theory holds that where the number of potential monitors is very high, the collective action problem (see appendix) will be particularly acute.
Such demands arise from a coordination problem, a concept that derives from game theory. In neoclassical economics, to choose rationally is to seek to maximize one’s own rewards. The actions of other economic agents are irrelevant 3 We owe these examples to Seabright (2004). Panics, Bank Runs, and Coordination Problems 25 to these decisions. By contrast, game theory recognizes that outcomes depend not only on one’s own strategies and the market conditions, but also directly on the strategies chosen by others.
Great flexibility in funding allowed banks to exploit new investment opportunities and, arguably, reduced their liquidity risks. A bank that found itself short of funds could tap the money market, making the banking system less vulnerable to the risk of a rapid withdrawal of deposits. Some academics argued that greater reliance on money market funding also increased the market discipline of banks. Unlike retail depositors who tend to be relatively uninformed about the riskiness of a bank’s business and who lack the incentives to monitor banks closely (see Chapter 2), corporate treasurers and the treasurers of MMMFs possess both the knowledge and expertise to monitor closely the banks to which they lend.
Global Bank Regulation: Principles and Policies by Heidi Mandanis Schooner, Michael W. Taylor