Reforming finance in transitional socialist economies : avoiding the path from shell money to shell games

In the late 1980s, transitional socialist economies (TSEs) in Central and Eastern Europe were only somewhat more sophisticated than shell money systems: savings books or currency had to be used for most transactions and there was no risk assessment, information monitoring and acquisition, or portfolio management. The TSEs have moved toward a two-tiered banking system but they lag in the development of competitive, market-based financial systems. In several TSEs the financial system seems to be part of a shell game to hide the losses of the real economy. The authors argue that rapid, successful economic reform requires putting the shell game to an end. They review several contentious issues of financial reform in the TSEs, especially issues involving macrofinance, corporate finance, the internal debt problems, and the need to build efficient banks. The authors contend that the banks should be"cleaned up"when they are privatized, to prevent the quick reemergence of debt problems. They believe that either of the proposed alternatives for shaping financial systems in the TSEs - very highly capitalized banking or narrow banking - would minimize the need for future support. Either alternative would reduce leverage in the TSEs and provide more financial stability. But taking concerns about moral hazard to an extreme - prohibiting debt finance - could starve new firms for credit and limit economic growth.Economic Theory&Research,Financial Crisis Management&Restructuring,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation

The regulation and supervision of banks around the world - a new database

International consultants on bank regulation, and supervision for developing countries, often base their advice on how their home country does things, for lack of information on practice in other countries. Recommendations for reform have tended to be shaped by bias rather than facts. To better inform advice about bank regulation, and supervision, and to lower the marginal cost of empirical research, the authors present, and discuss a new, and comprehensive database on the regulation, and supervisionof banks in a hundred and seven countries. The data, based on surveys sent to national bank regulatory, supervisory authorities, are now available to researchers, and policymakers around the world. The data cover such aspects of banking as entry requirements, ownership restrictions, capital requirements, activity restrictions, external auditing requirements, characteristics of deposit insurance schemes, loan classification and provisioning requirements, accounting and disclosure requirements, troubled bank resolution actions, and (uniquely) the quality of supervisory personnel, and their actions. The database permits users to learn how banks are currently regulated, and supervised, and about bank structures, and deposit insurance schemes, for a broad cross-section of countries. In addition to describing the data, the authors show how variables ay be grouped, and aggregated. They also show some simple correlations among selected variables. In a comparison paper ("Bank regulation and supervision: What works best") studying the relationship between differences in bank regulation and supervision, and bank performance and stability, they conclude that: 1) Countries with policies that promote private monitoring of banks, have better bank performance, and more stability. Countries with more generous deposit insurance schemes tend to have poorer bank performance, and more bank fragility. 2) Diversification of income streams, and loan portfolios - by not restricting bank activities - also tends to improve performance, and stability. (This works best when an active securities market exists). Countries in which banks are encouraged to diversify their portfolios, domestically and internationally, suffer fewer crisis.Banks&Banking Reform,Economic Theory&Research,Payment Systems&Infrastructure,Financial Intermediation,Financial Crisis Management&Restructuring,Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Economic Theory&Research,Insurance&Risk Mitigation

Financial Regulation And Performance: Cross-Country Evidence

This paper examines three questions. First, do countries with relatively weak government/ bureaucratic systems impose harsher regulatory restrictions on activities of banks? Second, do countries with more restrictive regulatory systems have poorly functioning banking systems? Third, do countries with more restrictive regulatory systems have a lower probability of suffering a banking crisis? We find that the answers are as follows. Countries with weak government/ bureaucratic systems tend to impose harsher regulatory restrictions on the activities of banks. There is mixed evidence regarding the impact of regulatory restrictions on bank performance. Finally, we find that countries that restrict securities market activities tend to have more fragile banking systems.

Bank regulation and supervision : what works best?

The authors draw on their new database on bank regulation and supervision in 107 countries to assess different governmental approaches to bank regulation and supervision and evaluate the efficacy of different regulatory and supervisory policies. First, the authors assess two broad and competing theories of government regulation: the helping-hand approach, according to which governments regulate to correct market failures, and the grabbing-hand approach, according to which governments regulate to support political constituencies. Second, they assess the effect of an extensive array of regulatory and supervisory policies on the development and fragility of the banking sector. These policies include the following: Regulations on bank activities and the mixing of banking and commerce. Regulations on entry by domestic and foreign banks. Regulations on capital adequacy. Design features of deposit insurance systems. Supervisory power, independence, and resources; stringency of loan classification; provisioning standards; diversification guidelines; and powers to take prompt corrective action. Regulations governing information disclosure and fostering private sector monitoring of banks. Government ownership of banks. The results raise a cautionary flag with regard to reform strategies that place excessive reliance on a country's adherence to an extensive checklist of regulatory and supervisory practices that involve direct government oversight of and restrictions on banks. The findings, which are much more consistent with the grabbing-hand view of regulation than with the helping-hand view, suggest that the regulatory and supervisory practices most effective in promoting good performance and stability in the banking sector are those that force accurate information disclosure, empower private sector monitoring of banks, and foster incentives for private agents to exert corporate control.Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Payment Systems&Infrastructure,Decentralization,Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,Financial Crisis Management&Restructuring,Insurance&Risk Mitigation

Finite element analysis of structures in the plastic range

Finite element analysis of structures in plastic rang

Bank regulations are changing : for better or worse ?

This paper presents new and official survey information on bank regulations in 142 countries and makes comparisons with two earlier surveys. The data do not suggest that countries have primarily reformed their bank regulations for the better over the last decade. Following Basel guidelines many countries strengthened capital regulations and official supervisory agencies, but existing evidence suggests that these reforms will not improve bank stability or efficiency. While some countries have empowered private monitoring of banks, consistent with the third pillar of Basel II, there are many exceptions and reversals along this dimension.Banks&Banking Reform,Access to Finance,,Debt Markets,Emerging Markets

Bank Regulation and Supervision: What Works Best?

This paper uses our new database on bank regulation and supervision in 107 countries to assess the relationship between specific regulatory and supervisory practices and banking-sector development, efficiency, and fragility. The paper examines: (i) regulatory restrictions on bank activities and the mixing of banking and commerce; (ii) regulations on domestic and foreign bank entry; (iii) regulations on capital adequacy; (iv) deposit insurance system design features; (v) supervisory power, independence, and resources, (vi) loan classification stringency, provisioning standards, and diversification guidelines; (vii) regulations fostering information disclosure and private-sector monitoring of banks; and (viii) government ownership. The results, albeit tentative, raise a cautionary flag regarding government policies that rely excessively on direct government supervision and regulation of bank activities. The findings instead suggest that policies that rely on guidelines that (1) force accurate information disclosure, (2) empower private-sector corporate control of banks, and (3) foster incentives for private agents to exert corporate control work best to promote bank development, performance and stability.

Financial regulation and performance : cross-country evidence

Costly bank failures in the past two decades have focused attention on the need to find ways to improve the performance of different countries'financial systems. Belief is overwhelming that financial systems can be improved but there is little empirical evidence to support any specific advice about regulatory and supervisory reform. With scant cross-country comparisons of financial regulatory and supervisory systems, economists cannot decide how to correct incentives and moral hazard problems in developing economies--whether, for example, to require higher (and more narrowly defined) capital-to-asset ratios, to mandate stricter definition and disclosure of non-performing loans, to require that subordinated debt be issued, or to install world-class supervision. Proposed reforms usually involve changes in financial regulations and supervisory standards, but many pressing questions about reform remain unanswered. Making use of a new database, the authors come up with brief answers to three key questions: Do countries with relatively weak governments and bureaucratic systems impose harsher regulatory restrictions on bank activities? Yes. Do countries with more restrictive regulatory regimes have poorly functioning banking systems. No--or at least the evidence is mixed. Do countries with more restrictive regulatory systems have less probability of suffering a banking crisis? No. In fact, the reverse is true. In countries where banks'securities activities are restricted, the likelihood of a banking crisis is greater, other things being equal.Financial Crisis Management&Restructuring,Payment Systems&Infrastructure,Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Environmental Economics&Policies,Economic Theory&Research

Nonlinear analysis of structures

The development of nonlinear analysis techniques within the framework of the finite-element method is reported. Although the emphasis is concerned with those nonlinearities associated with material behavior, a general treatment of geometric nonlinearity, alone or in combination with plasticity is included, and applications presented for a class of problems categorized as axisymmetric shells of revolution. The scope of the nonlinear analysis capabilities includes: (1) a membrane stress analysis, (2) bending and membrane stress analysis, (3) analysis of thick and thin axisymmetric bodies of revolution, (4) a general three dimensional analysis, and (5) analysis of laminated composites. Applications of the methods are made to a number of sample structures. Correlation with available analytic or experimental data range from good to excellent