Banking Regime Research Articles

A Proposed Model for Organizing The Regulation and Supervision of The Saudi Central Bank on Islamic Banks

The study aimed to design a proposed model for a system of regulation and supervision of Islamic banks that is consistent with the characteristics and nature of its work, by answering the main question: What is the proposed vision for the Saudi Central Bank to create an appropriate regulatory and supervisory regime for Islamic banks? To accomplish its main goal represented in establishing a proposed model for designing a supervision and regulation system for Islamic banks operating in the Saudi banking sector. The study used the deductive and inductive approaches to achieve its main goal. The study considers its construction of a proposed model that enables the Central Bank of Saudi Arabia to reach the formulation of a system of supervision and control of Islamic banks, the most important result that has been reached.

Innovation Banking Regimes - From Fossil Fuel towards Green Banking

Innovation Banking Regimes - From Fossil Fuel towards Green Banking

Screen Scraping in Australian Finance

Millions of Australians give their online banking credentials to third parties so as to gain access to financial products and services enabled by the analysis of the data in their bank accounts. Screen Scraping (‘SS’) has contributed significantly to the rise of the FinTech industry. While the risks SS entails are significant, nowhere has the practice been formally outlawed despite the availability of safer data transfer arrangements under Open Banking regimes. We examine approaches to SS in the EU, the UK, and Australia and argue the practice should be prohibited here. Such a ban would have two salutary effects. It would protect consumers in financial hardship who use payday loans and it would accelerate uptake of the Consumer Data Right.

GCC banks’ capital and liquidity: conventional versus Islamic banks

PurposeThis study strives to examine the relationship between bank capital and bank liquidity level considering the joint determination of both variables pointed out in the related literature. The evidence is from the Gulf Cooperation Council (GCC) countries: Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman. The theory of banking postulates that bank capital and bank liquidity are interrelated through various links. The study conjectures that large GCC banks do not have a concern with respect to liquidity due to the implicit guarantee of GCC wealthy governments to bank deposits.Design/methodology/approachThe study sample is comprised of all chartered GCC conventional and Islamic banks. The study employs several on-balance sheet ratios to proxy for bank capital and liquidity as defined in the banking literature. It also employs a related econometric model that considers the simultaneity issue pointed out in the related literature.FindingsThe results of the study reveal that GCC banks react positively when facing illiquidity by strengthening their capital ratio. Further analysis reveals that only small GCC banks (conventional and Islamic) tend to increase their capital levels when facing a liquidity shortage, which confirms the study conjecture that larger GCC banks have no credible concern about their liquidity position. Employing an alternative measure of liquidity does not change the results. This finding supports the financial fragility structure and the crowding out of deposits hypotheses.Originality/valueThe study contributes to the literature by employing a novel estimation approach to explore the difference in results as the sample banks represent two banking regimes, the conventional banks as well as the Islamic banks. Also, the study implicitly suggests that further research in this area could support the need to impose minimum and globally uninformed liquidity standards on banks.

ENHANCING THE COMPETITIVENESS OF INDONESIA’S FINANCIAL SERVICES SECTOR IN THE DIGITAL ERA THROUGH OPEN BANKING: LESSONS LEARNED FROM THE UK’S EXPERIENCE

In 2021, Bank Indonesia launched the National Open API Payment Standard (SNAP) to facilitate interoperable data-access for Indonesia’s digital payments sector. This article examines the lessons learned from the UK’s experience in open payments to improve the regulatory and institutional framework of Indonesia’s open banking regime. This article employs a comparative legal analysis of the UK’s open banking regime and concludes that Indonesia’s open banking regime could be improved by expanding the delivery of the Open API standards enabling interoperable data access for the entire financial services sector through an outcomes-based approach. Such expansion could be facilitated by encouraging collaboration between banks and fintechs and by creating an Open Banking App Store to increase user adoption, enhance product visibility, and widen access to digital financial services for Micro, Small, and Medium Enterprises (MSMEs)

Could Alberta Enact a Sub-National Open Banking Regime?

Could Alberta Enact a Sub-National Open Banking Regime?

Could Alberta Enact a Sub-National Open Banking Regime?

Could Alberta Enact a Sub-National Open Banking Regime?

United Kingdom: Financial Sector Assessment Program-Select Issues in Financial Safety Net Arrangements and Financial Crisis Preparedness

The United Kingdom (U.K.) bank resolution and financial crisis readiness arrangements are sound but with opportunities for continued and accelerated enhancements. The U.K. authorities’ individual and collective crisis readiness—including with other major jurisdictions—continues to improve. Mid-2022, all major U.K. banks and the authorities will issue the first public statements about these banks’ resolvability. This is supported by a comprehensive special resolution regime (SRR) and resolvability assessment framework (RAF) for banks. Yet, there is space—and a need—to further enhance the SRR, including its application to central counterparties (CCPs), and to introduce one for insurance companies. Furthermore, elements of the deposit insurance system and firm-specific resolution decision-making should be strengthened, and implementation and reputation risk addressed.

The Application of Corporate Governance Principles in the Banking Sector in Sri Lanka – An Overview

<p>All economies in the world are propelled by banks and the banking industry. Since the end of the war, Sri Lanka’s development has been accelerated and banks play a prominent role in the economy as they finance growth and development. Corporate Governance (CG) is seen as a particularly important regime for banks, due to their engagement with public funds, the public’s confidence and trust is of paramount importance to a bank’s stability. It is crucial that laws and regulations provide a versatile framework for good governance of the banking sector. This study critically examined the state of CG development and its underlying implications in the banking sector. Primarily, the relevant provisions of the Companies Act, Banking Act and the Monetary Law in Sri Lanka were evaluated, in addition to the other relevant laws, in order to ascertain whether they provide an adequate framework to ensure proper CG of banks. The Central Bank of Sri Lanka (CBSL) has improved its capacity over the years to supervise, enforce and maintain financial stability. It ensures the safety and stability of banks at all times and has taken steps to implement risk management, BASEL II, for tight CG of banking. A mandatory code of CG has been issued by the CBSL, requiring all banks to fully comply with the rules on or before the 31<sup>st</sup> of January 2009. This study also explores the scope, extent, impact and the effectiveness of the supervisory and regulatory role of the CBSL and identifies the challenges faced by it when addressing the CG issues in the banking industry.</p>

Формирование доктрины и законодательства о правовых режимах банковской деятельности

Introduction: the article presents the results of a critical analysis of the current state of theory and legislation on the legal regimes of banking. Objectives: to build a competitive legal framework for the operation of Russian credit institutions in ordinary and extraordinary legal regimes; to increase the availability of banking services in the Republic of Crimea and the federal city of Sevastopol; to develop the theory of legal regimes of entrepreneurial activities and banking. Methods: the methodological framework of this study is a set of scientific methods where the main ones are the methods of analysis, synthesis, generalization, induction and deduction, classification, interpretation, historical, comparative, statistical methods, logical methods of determining the scope and content of concepts; interpretation of law. Results: the author offers ideas contributing to the emerging doctrine of legal regimes of entrepreneurial activities in general and banking in particular: the paper provides arguments in favor of abandoning the category ‘general legal regime of entrepreneurial activities’; it substantiates the differentiation of legal regimes based on their legal properties into ordinary and extraordinary, with their further differentiation by business areas (or business entities), objectives and the initiator of introducing, regime quality completeness, voluntary or compulsory involvement of business entities, the impact on the business legal capacity, the territory of the legal regime and its validity. There are made numerous proposals aiming to improve the regulatory windows of the basic legal regime of banking and superstructural legal regimes – experimental, sanction and high-alert regimes. Conclusions: the theory of banking legal regimes has not yet been developed, which prevents creating an appropriate, efficient legislative system; active theoretical conceptualization and legislative improvement of all banking legal regimes are required.

Revenue diversification, risk and profitability of banks: Evidence from Zambia

The aim of this study was to evaluate the extent to which banks in Zambia were enhancing their performance as a result of undertaking revenue diversification activities. The study was quantitative in design. Panel data from 12 of the 18 banks in Zambia were analysed using several techniques such as the Herfindahl-Hirschman Index to measure income diversification, Z-Score to measure bank income volatility and the risk adjusted returns on assets to measure profitability. The study indicated that while some banks failed to enhance their profit performance through on-interest income diversification, others yielded better profit performance in some years, but not always. The overarching finding, however, was that non-interest income diversification improves profitability of banks in Zambia. With regard to bank risk, the study suggests that while some banks fail to minimize their income volatility through diversification into non-interest income, others reduce income volatility in some periods, but not always. The overall picture, however, is that larger banks use diversification to minimize their income volatility better that smaller banks. Considering the reduction in bank income diversification activities and the consequent decline in profitability of banks in Zambia, the Bank of Zambia should relax the regulatory regime for banks to encourage revenue diversification. On the other hand, given that bank income diversification is not a panacea for improving bank performance, banks should scrutinise whether their business models support non-bank activities as they make revenue diversification decisions.

Mechanisms to Handle Default Cases in Islamic Banking: The Malaysian Approach

This research investigates how Islamic banking institutions control default cases and the mechanisms they employ in handling such cases with reference to Malaysian Islamic banking regime. It was conducted on an exploratory design that employed doctrinal approach. Data were sourced from relevant statutes, regulatory guidelines, policy documents and established practices among Islamic banking institutions as well as academic texts that pertain to default cases. The data were examined with legal reasoning and qualitative analysis. The research finds that Islamic banks are prone to default cases and provide internal and external mechanisms to handle such cases in their operations. Though Islamic banks statutorily have wider scope than conventional ones, both banks are subject of the same framework in matter of credit risk regulations in Malaysia. The fusion of technology within procedures and governance mechanisms of dealing with default cases offers distinct benefits for Islamic banks in Malaysia. Analysis and reasoning in this research are restricted to the Malaysian Islamic banking regime only due to legal peculiarities among Islamic finance jurisdictions. Likewise, the research is confined to legal and regulatory perception of default cases only and could be furthered onto perceptions of other stakeholders in debt-recovery process. Again, subjective interpretation is inevitable in the analysis of some cases considered.This research contributes towards default cases literature in relation to Islamic banks and offers to fill research gaps therein. The research assists in understanding default control mechanisms employed by Islamic banks in Malaysia and stands to impart lessons to other jurisdictions thereon.

BOFIA 2020 and the New Regime for Banks’ Insolvency and Restructuring in Nigeria

Banks play a pivotal role in economic development globally and so the systemic risk posed by bank failures (for example, the 2008 global financial crisis) necessitates the creation of a special regime for the insolvency and restructuring of distressed banks. This special insolvency regime for banks helps to fortify the stability of the financial system and to maintain public confidence in the banking system in order to foster economic growth and development. In this regard, Nigeria passed the Banks and other Financial Institutions Act 2020 (BOFIA 2020) into law on 13 November 2020, repealing the erstwhile Banks and other Financial Institutions Act 1991 (BOFIA 1991). The new Act (BOFIA 2020) makes provisions for a more modern, more conducive and more business-friendly legal framework for the insolvency and restructuring of banks and other financial institutions (OFIs) in Nigeria. This paper highlights and explores the significance of some of these specific provisions in that context.

EFFECT OF CASH FLOW ON PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

This paper examined the effect of cash flow on the performance of listed Deposit Money Banks (DMBs) in Nigeria. With the aid of multi-stage sampling technique which uses both pure random and eliminating method, twelve (12) banks were sampled for investigation over ten years beginning from 2006 to 2015 from a total population of fifteen (15) Deposit Money Banks (DMBs) listed on the Nigerian Stock Exchange. This corresponds to 120 observations from a total of 150. Published financial statements of the selected banking firms under study were the source of data. From the objectives of the study, a total of three hypotheses were formulated and tested at 5% level of significance. Data gathered were subjected to statistical analysis through the simple regression technique, and the EViews statistical software package was used to do the analysis. The findings showed that cash flows from operating, investing and financing activities, have no statistically significant effect on the returns on investment, returns on equity and earnings per share of Deposit Money Banks (DMBs) studied. The study yielded several recommendations, including an urgent and compelling need for the regulatory authorities to rethink the accounting regime for banks. The new regime should specifically take banks’ credit, creating function into consideration mostly because this uniqueness in banking operations entails that cash flow from the operating activities functions differently and hence requires being differently accounted for too.

Commodity money, free banking, and nominal income targeting: Lessons for monetary policy reform

Some have argued that nominal income targeting is desirable because it would replicate characteristics of a free banking regime. However, the degree to which this is true and desirable depends on the properties of commodity-based monetary regimes. In this paper, I provide a model of commodity money. I find that a pure commodity money regime can only generate an efficient stationary equilibrium by divine coincidence or by giving policymakers control over the supply of the commodity. The introduction of bank notes makes it much more likely that the economy will achieve an efficient equilibrium. In particular, in a commodity-based system, bank notes are equivalent to call options on the commodity and the commodity holdings are equivalent to a put option on the commodity. Assuming that there is no risk-free arbitrage in equilibrium, then both bank notes and the commodity will have an expected rate of return equal to the risk-free rate. If the risk-free rate is equal to the rate of time preference, then this commodity regime is efficient. A free banking system would therefore not only minimize deviations between the supply and demand for money, but it would also (potentially) implement the Friedman rule. Both market-based and more conventional nominal income targeting regimes are unlikely to replicate both features of a free banking system unless the nominal income target has a deflationary bias.

Interest rate pass‐through and exogenous factors: Evidence from Vietnam

AbstractThis article examines the efficiency of the monetary policy transmission mechanism in Vietnam by investigating a two‐stage linkage between policy rates and retail bank rates in consideration of exogenous drivers including the asymmetric pass‐through behaviour and the State Bank of Vietnam's significant change on the operational target. The month‐end dataset, and asymmetric error correction model, autoregressive distributed lag regression and vector autoregressive regression are utilized to measure the degree of ultimate pass‐through, adjustment speed, and short‐run pass‐through of the two‐stage interest rate pass‐through process. Our results indicate quick responses in market rates to changes in policy rates; and incomplete long‐run pass‐through coupled with delayed impact and slow adjustment from market rates to retail rates; while the responses appear to be symmetric with respect to the direction of change of rates. Moreover, the positive impact of the State Bank's regime shift on the effectiveness of the interest rate transmission is another important finding of this study. These findings eventually lead to some suggestions on the possible measures to enhance the effectiveness of monetary policy transmission.

Comparative Efficiency Study between Islamic and Traditional Banks

Islamic banking caught attention due to its resilience to the significant shocks that hit the economy in late 2008. This research aims to evaluate the efficiency of a sample of 66 banks including both Islamic and traditional banks in various countries ranging from Egypt, Pakistan, Bangladesh, Saudi Arabia, Kuwait, Qatar, Iraq, Emirates, Sudan, Turkey, Bahrain and Jordan throughout 2009-2014. This research aims at identifying which banking regime proves to be more efficient and its significance using Financial Ratio Analysis (FRA), composed of cost efficiency, revenue efficiency and profit efficiency ratios along with the One-way ANOVA test. The impact of efficiency of the performance of the banks in terms of Return on Assets (ROA) and Return on Equity (ROE) is also evaluated through multiple regression analysis. Lastly, inflation’s effect on the different banking efficiency measures will be tested using regression analysis. The findings indicate that the traditional banking system is superior in terms of cost, revenue and profit efficiencies, furthermore, the results of the multiple regression analysis on the banks’ return on assets and return on equity imply that the efficiency of Islamic banks have more influence on their profitability compared to their traditional counterparts. Inflation had minimal effect on the efficiency of both banking system. The overall results imply the superiority of traditional banks to the relatively new banking system.

Financial Integration, Banking Supervision and Sustainability of the Western Balkan Countries

Purpose: This paper examines the need of financial integration of Western Balkan countries as the main indicator of the region’s economic growth. Design/Methodology/Approach: We provide an overview in order to explain what the financial system in the region is. Primarily we concentrate in the banking sector and the non-performing loans in the region. They require attention and standardization of regulatory classification. By establishing a regional platform it would be of additional value and would help overcome the limited visibility in some of the countries. Findings: Currently the challenges for financial stability in the Western Balkan area comprise non-performing loans, low capital adequacy and moderate growth of credit in the economy. The banking sector is reducing the debt due to required financial stability measures of the European banking authorities. As these countries integrate their financial institutions and markets into the European financial system, on the path towards harmonization of national and European legislation, cooperation between financial entities in the Western Balkans becomes very important. The Western Balkan countries are in a different stage of development of banking sustainability and supervision and because of that there is a need for more integration with the European Banks and the respective regulators to ensure an adequate banking regime. Practical Implications: The article highlights the fact that Western Balkan countries need to intensify their reforms to build banking sustainability in order to meet the criteria for EU membership. Originality/Value: With this article we show that the Western Balkan countries in their integration processes must first align their local and European legislation and requirements.

The Corona Virus Can Infect Banks Too

This paper examines possible options for Member States to redress the impact of the corona virus (SARS-CoV2) on financial institutions in the context of the directive on bank recovery and resolution, the regulation on the Single Resolution Mechanism and the State aid rules on banks. The EU banking regime requires, in principle, that the granting of State aid to a bank should lead to its resolution or liquidation. The paper considers how Member States may support banks outside the scope of Article 107(1) TFEU and how State aid may be granted without triggering resolution or liquidation. The current measures which are rolled out by European governments to support the real economy will indirectly benefit banks too. The paper reviews the recently announced ‘Temporary Framework’ according to which any ‘indirect aid’ to banks will not infringe the provisions of the directive or regulation. The paper identifies gaps in the current rules concerning solvent, but not systemic banks, ambiguities in the interpretation of the concept of ‘serious disturbance’ and unclear guidance as to how indirect aid may be minimised. Keywords: Bank resolution; Liquidation; Temporary Framework; COVID-19.

A Technical Recitation on Efficiency of Islamic and Traditional Banking System in Kingdom of Bahrain

Banking industry plays a vital role in the for economic development of a country. This research aims at identifying which banking regime proves to be more efficient and its significance using Financial Ratio Analysis (FRA), composed of cost efficiency, revenue efficiency and profit efficiency ratios along with the One-way ANOVA test. The traditional banking system governs the financial sector by dealing with the majority of financial transactions of a country and the existence of Islamic and conventional banks has contributed for the development of the economy. The present study focuses on the comparative analysis of financial performance of Islamic and traditional banks in terms of cost and income in Bahrain. The study uses financial tools like profitability, liquidity and solvency, commitment to economy and community, efficiency and productivity of both streams of banks. The findings indicate that the traditional banking system is superior in terms of cost, revenue and profit efficiencies, furthermore, the results of the multiple regression analysis on the banks’ return on assets and return on equity imply that the efficiency of Islamic banks have more influence on their profitability compared to their traditional counterparts. Inflation had minimal effect on the efficiency of both banking system