INTERNATIONAL BANKING REGULATION

International Banking Regulation



International Banking Regulation

This paper provides answers to two questions related to banking crisis and the need of regulation to minimise risks. This paper is written with an emphasis on European Union's context.



(A): International Regulation for minimising banking risk

The progressive incorporation of global fiscal markets has brought with it an amplified focus on the coordination of provisions on the national borders (www.fsa.gov.uk). This trend has prompted a debate about the costs and benefits spurred the international harmonization of banking regulation. (Nanda, 1996 , 58).

Although this may sound like a contradiction in itself: Regulation should minimize or exacerbate, they are not the real concerns of regulated firms and should be examined more closely. Many arguments for government intervention in the banking sector regulation - the existence of monopoly power, externalities and information asymmetries in a potentially positive role for state intervention to correct this market failure and social welfare to improve the conditions. (Myers, 1977, 75).

Disagreement in regulation

Others disagree, arguing the theory of economic regulation (the public choice perspective), the essential work of (Mishkin, 2006, 1988) and extensions (Kane, 2009, 40) can be reduced which supports to maximize their political support. In particular, this approach is the hypothesis that certain individuals or interest groups potentially affected by regulations to redistribute the wealth away from other groups towards themselves, and so there is a demand for regulatory benefit basis - even when no market failure (Kane, 2000, 67). (Josephine, 2006 60).

In addition (Herring, 2008, 1951) argues that government failures are more important than market failures. There is a close link between deposit insurance and capital adequacy. Deposit insurance is the information asymmetry in the banking system overcome (www.w4mp.org). A depositor is therefore faced with a problem or as adverse selection (Calomiris, 2009, 1965), describes a market for "lemons". (www.bis.org).

Confusion in Regulation Risk

There is much confusion regarding the definition and sources of regulatory risk. So far there does not seem to make a precise definition of what is regulatory risk. The term regulatory risk was in the political debate for almost every regulated industry, you would care to think teased. If considerably, higher capital requirements are imposed by the regulators, which are binding, capital deficient banks forced to hold more capital. Consequently, their value will decline if their capital structure moves away from its optimum level and / or their ability to expropriate deposit insurance subsidies reduced by the insurance agency, will lead to an increase in their cost of capital. Additionally (Brunner Meier, 2009, 77) argue that bank equity is clearly expensive, and that these costs come from the role of demand deposits as an efficient means of exchange.

The country with stricter enforcement of regulatory standards is in fact able to "diversification" of their new equity issues between the countries by selling their shares to the consumer with the lowest risk of a liquidity crisis shock (Nanda, 1996, 59).

(B): Cross-border banking in European Union countries

At the EU level the regulation and supervision of financial markets and ...