The Interconnections Between the Shadow Banking System and the Regular Banking System. Evidence from the Euro Area

One of the most important lessons of the global financial crisis has been the deep interconnectedness between the shadow banking system and the regular banking system. These two systems are linked through several channels, of which one of the most important is the financing provided by regular banks to the shadow banking system and vice versa. In addition, regular banks can originate loans that are securitized. Subsequently, part of the securitized instruments may remain on the balance sheet of the originating banks or be found on the balance sheet of other regular banks and shadow banking entities. These links between the two systems can increase contagion and systemic risks, which in turn may affect financial stability. The financial crisis has acutely revealed the negative effects these interconnections can generate. The interconnections are underestimated by the available data because of the difficulties in gathering information on the euro area. Within this context, our paper tries to evaluate and analyze the interconnections between the shadow banking system and the regular banking system within the euro area, both in the pre-crisis period and currently. Finally, some measures to regulate the interconnections between these two systems are raised

The regulatory framework of trade finance: from BASEL I to BASEL III

       The global crisis revealed several weaknesses in the international framework of banking regulation. Consequently, the Basel Committee on Banking Supervision (BCBS) proposed a package of measures to strengthen the resilience of the banking sector. Besides the positive effects they have on financial stability, the new regulatory provisions affect the ability of banks to provide trade finance. Therefore, the banking industry considers that regulators have not taken into account the low-risk profile of activity. Starting from this premise, the paper consists of three parts. In the first part, the role and objectives of the BCBS are presented; the second part is designed to review the most important trade instruments and to underline the tendencies in trade finance; finally, the last part highlights the regulation of trade finance under the Basel I, Basel II and Basel III regimes, and some unintended consequences of the Basel III framework.

Some Economic Dimensions of Sustainable Development

We are living today in a world of huge challenges, deep interconnections, profound mutations and global risks under the impact of several factors among which climate change, innovation, increased competition or evolution of technology could be mentioned.....

The impact of financial innovation on banking regulation. Evidence from the global financial crisis

The development of financial innovations in a fast pace led to increased efficiency of the financial system, but raises some issues regarding the regulation and supervision of financial activity. The latest example is the global financial crisis, which has pointed out the negative role played by the financial innovations of credit risk transfer on the stability of the financial system. Starting from the above, the article herein is structured in the following sections: the first one reviews the decisive factors of the financial innovation, the second one highlights the role of the financial innovations in the global financial crisis and the final one refers to the impact of the financial innovations on the financial regulation and supervision

BASEL III – A new approach to improve international financial stability

In its first part, the article highlights the factors standing at the basis of the modification of the general framework of development of the banking activity in the last decades and the main trends that manifested on the international banking market until the global financial crisis. Thenceforth, the main lessons learned from the global financial crisis for the regulation and supervision authorities are presented. The final part of the article concerns the Basel Committee answer to the global financial crisis, concretised in a reform programme regarding the regulatory framework of the banking activity. The improvements and news brought by the Basel III reform programme take into account the flaws revealed by the global financial crisis and have the purpose to strengthen the stability of the international financial system. 

MODEL OF CHOICES, INSTITUTIONS AND DIRECT DEMOCRACY QUASI-ECONOMIC FACTORS OF THE INFLUENCE OF UNDERGROUND ECONOMY

Research in recent decades has shown that an analysis of underground economy from the limiting perspective of economic factors of influence is insufficient. Through an integrative approach it is opened the way to a multidisciplinary and multi causal understanding of all factors (economic, noneconomic, quasi economic) that influence the phenomenon of underground economy. The present work pleads for the analysis of the concept underground economy (multidimensional and composite) through the instruments of study: the choices, institutions and direct democracy. The model of choices express the decision of labor force to activate on the official labor market or to the illegal labor market in the context given by opportunities, preferences and constraints. Institutions defines the capacity of regulation  and implementation of government policies with implications in stimulating or discouraging economic subjects to hide activities in the sphere of underground economy. Direct democracy through its institutions (referendums, legislative initiatives) provides the political framework for the active involvement of the taxpayer as a voter or elector to a healthy and sustainable economic development. The results of active involvement of citizens consist in a more effective implementation of strategies and tax policies and a reduction of  incentives to escape in the sphere of economic informality.

The current financial crisis and lessons which can be gained

Since the development of modern banking in Italian renaissance, financial crises have from time to time affected institutions and markets and have raised concern about stability of financial systems. Authorities and scholars around the world are investigating the matter discussing on the proximate and more distant causes of crises and gaining lessons from the experience of the past, on the steps that could be taken to minimize vulnerability of financial systems. The paper focuses on the analysis of the most important factors contributing to the triggering of the current financial crisis, the peculiarities and the lessons of the crisis.financial crisis; financial globalization; subprime; securitization; mortgage backed securities; financial regulation

BANKING SYSTEMS IN ROMANIA AND ICELAND: TWO DIFFERENT WORLDS BUT SIMILAR DEVELOPMENT

The novelty of this paper is the comparative analysis of the Romanian and Icelandic banking systems. The study results reveal that despite the fact that Romania and Iceland are two different worlds, there are several similarities between the banking systems of these countries. They include a late development of banking systems, foreigners contributing a great deal to the development of the banking systems in the early stage of evolution. After the Second World War until the 1990s specialized banks operated in both countries. The banking systems of both countries prior to the 1990s were dominated by politics. Liberalization of banking and capital occurred both in Romania and Iceland after 1990; the bank privatization process took place during a similar period (1999-2006, Romania; 1998-2002, Iceland). Before privatization, banks in both countries lacked experience in a new banking “arena”. The global financial crisis greatly affected the two banking systems. Despite similarities, the evolution of the two banking systems was also marked by differences, notably the ownership origin of banks after privatization (foreign dominance in Romania; domestic owners in Iceland) and different business models developed by banks in the pre-crisis period.