There are proponents and opponents of centralising the regulation of the financial system. Some argue that it should be managed by Central Banks. Regardless of your stance on the matter, the crux of the debate lies elsewhere. The question is not whether centralisation of regulation should occur. Rather, it is about when and how central banks should assume these responsibilities. During the 2008 financial market crisis, swift and decisive action was required from many regulators, including central banks. Their role was to stabilise the financial system and prevent the collapse of banks ...
Banking regulation
Alliances in tough economic times
The financial market crisis has significantly weakened many banks and financial institutions, making it difficult for them to be highly innovative and take on excessive risk. In these circumstances, these institutions consider alliances as a choice to strengthen their market position. Like survivors of a bad storm, many financial institutions have emerged from the crisis with significant support and are now beginning to recover. The stronger, healthier institutions may be better positioned to consider strategic acquisitions to enhance their strategic position for when the business cycle ...
Warning signs not enough for Regulators
Warning signs like the failure of Enron, Arthur Andersen and others that occurred during and after the dot.com boom in the late 1990's, were not internalised by banks or the financial market. Regulators took steps to prevent these conditions from arising again but these measures were not effective enough. In general, regulators took several key steps. They included the introduction of Sarbanes-Oxley in the USA. There was also an enforced improvement of global risk management standards and tools. Additionally, the Basel II capital requirements were revised. The world ...
Regulation cannot be avoided by banks
Plain and simple, banks are important because they introduce efficiencies to the local as well as the global economy. Regulation and supervision of conduct has become an important part of doing business as a bank. Reasons why banks are important There are 3 reasons why banks are important to society. All three of these reasons create efficiencies in the economy. It’s therefore in societies interest that somebody ensures that these efficiencies are not diminished and stay in place to help society. Effective regulation can play a role in achieving this aim. Why ...
Positioning technology with risk management and compliance
On the one hand the fast evolving field of technology and on the other, risk management and compliance. How these functions are brought together and managed can create strategic advantages. The evolution of banking Looking back at banking in the 1980’s, banks were focused mostly on taking deposits and making loans provided through a branch network emphasising face to face contact with customers. These customers were not sophisticated and trusted their bankers to act in their best interest. With the dramatic advancement in technology though the 1990’s and ...
Bailout of Greece explained
Below is a video clip taking a lighthearted look at the bailout of Greece and just how crazy the steps taken by the Euro Countries have been. Billions of Euros have been spent in the bailout that the Euro Countries simply do not have (yet). Who knows, it's always possible that if the politicians of Europe have their way with this bailout that the new official language of the Euro zone becomes Chinese? The Chinese are keen to acquire a chunk of Europe by assisting with funding for the bailout. They are on record as saying that they already hold far too much US dollar debt so what an ...
Understanding Governance, Risk Management, and Compliance
What is the difference between Governance, Risk Management, and Compliance? They have become an accepted terms that describe similar related actions and procedures by an organisation. The three terms are closely related, and are increasingly integrated and aligned by business wherever it is practically possible so as to avoid conflicts, wastefulness and gaps. Organisations typically interpret the three terms differently. Differences in interpretation also occur across divergent international jurisdictions. Generally, the terms typically relate to activities such as ...
What is liquidity risk management?
At the onset of the financial market crisis in 2007, many banks had adequate capital levels but they still ended up experiencing serious difficulties when it came to liquidity risk management. They had failed to sufficiently accounted for their exposure to liquidity risk. Before the crisis, funding was readily available and cheap. This created the impression that markets were safe and that liquidity for funding purposes would always be plentiful and available. However, the uncertainty that the financial market crisis had created rapidly caused cheap funding that ...