Corporate governance and banking regulation

The globalisation of banking markets has raised important issues regarding corporate governance regulation for banking institutions. This research paper addresses some of the major issues of corporate governance as it relates to banking regulation. The traditional principal-agent framework will be used to analyse some of the major issues involving corporate governance and banking institutions. It begins by analysing the emerging international regime of bank corporate governance. This has been set forth in Pillar II of the amended Basel Capital Accord. Pillar II provides a detailed framework for how bank supervisors and bank management should interact with respect to the management of banking institutions and the impact this may have on financial stability. The paper will then analyse corporate governance and banking regulation in the United Kingdom and United States. Although UK corporate governance regulation has traditionally not focused on the special role of banks and financial institutions, the Financial Services and Markets Act 2000 has sought to fill this gap by authorizing the FSA to devise rules and regulations to enhance corporate governance for financial firms. In the US, corporate governance for banking institutions is regulated by federal and state statute and regulation. Federal regulation provides a prescriptive framework for directors and senior management in exercising their management responsibilities. US banking regulation also addresses governance problems in bank and financial holding companies. For reasons of financial stability, the paper argues that national banking law and regulation should permit the bank regulator to play the primary role in establishing governance standards for banks, financial institutions and bank/financial holding companies. The regulator is best positioned to represent and to balance the various stakeholder interests. The UK regulatory regime succeeds in this area, while the US regulatory approach has been limited by US court decisions that restrict the role that the regulator can play in imposing prudential directives on banks and bank holding companies. FSA regulatory rules have enhanced accountability in the financial sector by creating objective standards of conduct for senior management and directors of financial companies. The paper suggests that efficient banking regulation requires regulators to be entrusted with discretion to represent broader stakeholder interests in order to ensure that banks operate under good governance standards, and that judicial intervention can lead to suboptimal regulatory results

Aligning anti-money laundering, combating of financing of terror and financial inclusion : Questions to consider when FATF standards are clarified

Purpose &ndash; The purpose of this paper is to identify key questions that should be addressed to enable the Financial Action Task Force (FATF) to provide guidance regarding the alignment of anti-money laundering, combating of financing of terror and financial inclusion objectives.Design/methodology/approach &ndash; The paper draws on relevant research and documents of the FATF to identify questions that are relevant to consider when it formulates guidance regarding the alignment between financial integrity and financial inclusion objectives.Findings &ndash; The FATF advises that its risk-based approach enables countries and institutions to further financial inclusion. It is, however, not clear what the FATF means when its uses the terms &ldquo;risk&rdquo; and &ldquo;low risk&rdquo;. It is also unclear whether current proposals for financial inclusion regulatory models will necessarily limit money laundering (ML) aswell as terror financing risks to levels that can be described as &ldquo;low&rdquo;. The FATF will need to clarify its own thinking regarding low money laundering and low terror financing risk before it will be able to provide clear guidance to national regulators and financial institutions.Originality/value &ndash; This paper was drafted to inform current FATF discussions regarding guidance on financial inclusion. The questions are relevant to all stakeholders in financial regulation.<br /

BANKING INNOVATIONS RISK – PROFITABILITY RELATIONSHIP IN THE BANKING SYSTEM OF THE REPUBLIC OF MOLDOVA

The level of information technologies development in modern banks represents an essential factor in maintenance and consolidation of the position on the market. In this respect all Moldovan banks develop risk management policies with regard to banking IT’s and e-products and services, which they consider as the main part of banking innovations at the moment. The purpose of this article is to analyze each innovation (Information Security Services, Business Systems Controls, Business Continuity Management, IT Outsourcing, Information Systems Governance, IT Performance, Project Risk Management, IT Internal Audit) in terms of risks and benefits when these risks are managed properly.banking system, risk, information technologies

Avoiding another Enron:The Role of the External Auditor in Financial Regulation and Supervision

Following the collapse of Enron, many questions have been raised as to why the UK has avoided its Enron.ii Many commentators have considered whether this is due to the fact that the UK's system of financial regulation relies more on a principles based system, which promotes more fairness in its application as opposed to a rules based system.iii However, the crucial roles played by auditors in financial reporting and the system of financial regulation and supervision have been overlooked to an extent. In view of a spate of financial scandals such as those of Enron, Worldcom, Tyco etc, the US Congress acted swiftly by enacting the Sarbanes Oxley Act on July 30 2002 with the aim of protecting investors and restoring their confidence in the financial system.iv Amongst the provisions within the Sarbanes Oxley Act, the prohibition of non-audit services by auditors providing audits at that particular time, is a main feature of the Act.v This provision not only highlights the importance of the role of the external auditor, but also emphasizes the fact that safeguards are essential in order to prevent that role from being abused. Much as there are lessons which could be learned from the supervisory approaches adopted by various jurisdictions, there are also considerations on whether these jurisdictions could benefit from the measures implemented by US regulators and accounting bodies in the aftermath of Enron

The Historical Role of the European Shadow Banking System in the Development and Evolution of Our Monetary Institutions

When we hear about the 2008 Lehman Brothers crisis, immediately we relate it to the concept of "shadow banking system"; however, the credit intermediation involving lightly regulated entities and activities outside the traditional banking system are not new for the European Financial Systems, after all, many innovations developed in the past, were adopted by European nations and exported to the rest of the world (i.e. coinage and central banking), and European innovators unleashed several financial crises related to "shadowy" financial intermediaries (i.e. the Gebroeders de Neufville crisis of 1763). However, despite not many academics, legislators and regulators even agree on what "shadow banking" is, this latter does not refer exclusively to the functions of credit intermediation and maturity transformation. This concept also refers to the creation of assets such as digital media of exchange which are designed under the influence of Friedrich Hayek and the Austrian School of Economics. This lack of a uniform definition of "shadow banking" has limited our regulatory efforts on key issues like the private money creation, a source of vulnerability in the financial system that, paradoxically, at the same time could result in an opportunity to renovate European institutions, heirs of the tradition of the Wisselbank and the Bank of England which, during the seventeenth century, faced monetary innovations and led the European monetary revolution that originated the current monetary and regulatory practices implemented around the world