International Supervisory Research Articles

Military Unionism from the Perspective of International Law: Between National Security and Freedom of Association

This article conducts a critical analysis of the issue of the access of military personnel to the legal guarantees of the freedom to associate in trade unions from the perspective of international legal standards. Despite the consistently freedom-oriented evolution of international standards which have become applicable to union freedoms in recent decades, many states still uphold sweeping statutory bans on the unionization of military personnel. The potential engagement of members of the armed forces in any union activity is a contentious issue suspended between the requirement to protect the very essence of the freedom of association (FoA), the practices and traditions established in many states, and the need to maintain the effective security of the state against external threats. The analysis considers the evolution of perspectives presented by competent international supervisory and interpretative bodies which have substantially revised their views in recent years on the extent of necessary legal guarantees and acceptable restrictions on freedom of association with respect to military personnel. The analysis leads to the conclusion that a complete and absolute statutory ban on the unionization of military personnel may be incompatible with current international standards. The absolute requirement to respect the fundamental essence of freedom of association as an unquestionable and universal standard of human rights means that national legislators should guarantee military personnel at least the minimum level of freedom to associate in trade unions. Military Unionism, Freedom of Association, National Security, International Law, Human Rights, Members Of Armed Forces, Trade Union Freedoms, International law

Eu search for regulatory answers to crypto assets and their place in the financial markets’ infrastructure

Crypto assets are no longer a niche topic for geeks but an important trend in financial markets and an uprising asset class. This is due to technological advancements, spike in token issuances, and Facebook's Libra project, now called Diem, among other things. Many potential benefits of crypto assets for the financial sector are widely recognized, including cost savings, improved efficiency and transparency. The rapid growth of the crypto assets ecosystem has intensified the focus of regulators. They are challenged to provide an adequate response, protect investors and customers, and mitigate risks while fostering technological development. Currently, at the EU-wide level, there is a regulatory gap, which contributes to legal uncertainty and weak investor protection. Several European jurisdictions have been proactive and successfully designed their own national regulatory solutions to crypto assets. Many European and international supervisory and regulatory bodies contributed to the debate and issued reports, analysis and statements highlighting risks and making regulatory recommendations. The European Commission took the first steps to assume its competence over all crypto assets within the EU and, after a comprehensive review of the entire crypto assets ecosystem, issued a proposal for a regulation on markets in crypto assets. This paper evaluates the EU's current regulatory approach to crypto assets against the background of the views and reports of several advisory and supervisory bodies and international organizations and against market developments.

State Obligations to Counter Islamophobia: Comparing Fault Lines in the International Supervisory Practice of the HRC/ICCPR, the ECtHR and the AC/FCNM

Islamophobia, like xenophobia, points to deep-seated, ingrained discrimination against a particular group, whose effective enjoyment of fundamental rights is impaired. This in turn triggers the human rights obligations of liberal democratic states, more particularly states’ positive obligations (informed by reasonability considerations) to ensure that fundamental rights are effectively enjoyed, and thus also respected in interpersonal relationships. This article identifies and compares the fault lines in the practice of three international human rights supervisory mechanisms in relation to Islamophobia, namely the Human Rights Committee (International Covenant on Civil and Political Rights), the European Court of Human Rights (European Convention on Human Rights) and the Advisory Committee of the Framework Convention for the Protection of National Minorities. The supervisory practice is analysed in two steps: The analysis of each international supervisory mechanism’s jurisprudence, in itself, is followed by the comparison of the fault lines. The latter comparison is structured around the two main strands of strategies that states could adopt in order to counter intolerance: On the one hand, the active promotion of tolerance, inter alia through education, awareness-raising campaigns and the stimulation of intercultural dialogue; on the other, countering acts informed by intolerance, in terms of the prohibition of discrimination (and/or the effective enjoyment of substantive fundamental rights). Having regard to the respective strengths and weaknesses of the supervisory practice of these three international supervisory mechanisms, the article concludes with some overarching recommendations.

THE INTERNATIONAL EXPERIENCE AND THE CURRENT RUSSIAN LEGISLATION REGARDING SUPERVISION OF MARGINAL CREDITING

The article analyzes the international Supervisory experience of the European Union in terms of monitoring the implementation of short sales. The analysis was carried out in order to determine further key directions of development of the Russian market of margin lending. In addition, the article also considers the current Russian legislation in terms of supervision of unsecured transactions, regulated by the Decree of the Central Bank of the Russian Federation, which entered into force on July 1, 2019. The obtained results of the analysis allowed to make a comparative characteristic of the regulation of short sales in the European and Russian jurisdictions, as well as to make a forecast regarding the hypothetical transformations of the current Russian legislation.The analysis of the European experience in part of control of implementation of the short sales established by SSR to disclosure of information on short positions, to restrictions on short sales, to powers and ESMA obligations, etc., allows to come to conclusion that regulation in the Russian jurisdiction can be expanded not only due to complication of a procedure for granting of a marginal loan by inclusion in a portfolio of the client of difficult nonlinear tools, but also due to establishment of requirements for disclosure of information on the high-concentrated short positions and establishment of thus constantly reconsidered threshold size. In article the assumption that the designated directions of development of regulation of short sales regarding expansion of powers of the regulator also will increase transparency of intermediary activity and the financial market is made, having provided thus reliable protection of interests of clients of financial intermediaries.

Pushback Against Supervisory Systems: Lessons for the ILO from International Human Rights Institutions

The ILO supervisory system, which has reviewed compliance with international labor standards for nearly all of the organization’s 100-year history, is widely hailed as cornerstone of its institutional architecture. In 2012, however, the employer representatives challenged the longstanding position of ILO expert bodies that Convention No. 87 on freedom of association implicitly protects the right to strike. The resulting “crisis of tripartism” has raised questions about the proper interpretation of international labor law and the future competences of ILO monitoring mechanisms. This chapter, a contribution to a forthcoming edited volume on the centenary of the ILO, offers a wider perspective on these events. It begins by analyzing how states and non-state actors have pushed back against the treaty monitoring bodies created by UN human rights conventions. The chapter then compares the similarities and differences between pushback against human rights treaty bodies and challenges to ILO expert committees over the right to strike. The chapter concludes by highlighting ongoing UN and ILO initiatives aimed at strengthening international supervisory systems.

State Formation Under International Supervision and the Construction of Hierarchies in National Membership: A Balkan Story

While territorial integrity is largely described as the norm in post-1945 Western Europe, this article shows that it is not one in twentieth century history. This article examines the post-World War I formation of the Kingdom of Yugoslavia at the Paris Peace Conference and the internationally supervised formation of the post-Yugoslav states in the 1990s. It argues that each time multinational entities dissolved and new states were formed in the name of self-determination, territorial rescaling had direct consequences for the status and rights of domestic populations leading to ethnic and citizenship stratifications further supported by international supervisory regimes.

Validation of the backtesting process under the targeted review of internal models: practical recommendations for probability of default models

This paper provides practical recommendations for the validation of the backtesting process under the targeted review of internal models (TRIM). It advises on the introductory steps for validating the backtesting process and reviews the available statistical tests for calibration, discrimination and stability backtesting. The TRIM regulatory exercise is an international supervisory initiative that inspects the internal models and related internal risk and governance policies of eurozone banks that are permitted to use the advanced internal risk-based (AIRB) approach. Under the TRIM guidelines, the designated banks should have specific policies and internal guidelines for the validation of the backtesting process. Further, the affected banks are required to validate the entire backtesting process. Addressing these needs, this paper serves as a basis for producing such policies and utilizing appropriate statistical tools for validating the backtesting process. The paper focusses on probability of default models. To date, no academic study has discussed the validation of the backtesting process with reference to the TRIM rules.

НАУКОВО–МЕТОДИЧНИЙ ПІДХІД ДО ОЦІНЮВАННЯ НЕЗАЛЕЖНОСТІ ФІНАНСОВОГО НАГЛЯДУ

У статті обґрунтовано важливість незалежності органів фінансового нагляду як запоруки стійкості фінансового сектору. Здійснено систематизацію критеріїв оцінювання інституційної, операційної та фінансової незалежності органів фінансового нагляду, які відповідають міжнародним стандартам нагляду у банківському секторі, у сфері страхування та цінних паперів. Для кожного з критеріїв розроблено порядок визначення рейтингових оцінок. Запропоновано алгоритм обчислення дифузних індексів інституційної, операційної та фінансової незалежності органів фінансового нагляду. Здійснено апробацію науково–методичного щодо оцінювання незалежності органів фінансового нагляду в Україні. Визначено ключові напрями підвищення незалежності фінансового нагляду.

‘Trust is good, control is better’: The 1974 Herstatt Bank Crisis and its Implications for International Regulatory Reform

With its international supervisory and regulatory implications, the failure of Bankhaus Herstatt is one of the landmarks of post-war financial history. This article offers the first comprehensive historical account of the Herstatt crisis, and contributes to the wider discussions on international supervisory and regulatory reform since the mid-1970s, including regulatory capture, markets' self-regulation and resolution of failed banks. In doing so, it first argues that contrary to a widely held view, the German authorities received early and repeated warnings about Herstatt's dealings but this involved only limited and ineffective regulatory/supervisory responses, then it turns to the actual collapse of the bank in June 1974, and finally explores the wider regulatory issues raised by the Herstatt case.

Integrated bank risk modeling: A bottom-up statistical framework

In the last few years, according to the evolution of financial markets and the enforcement of international supervisory requirements, an increasing interest has been devoted to risk integration. The original focus on individual risk estimation has been replaced by the growing prominence of top-down and bottom-up risk integration perspectives. Following this latter way, we bring together different approaches developed in the recent literature elaborating a general model to assess banking solvency in both the long-run (economic capital) as well as in the short period (liquidity mismatching). We consider banking capability to face credit, interest rate and liquidity risks associated to macro-economic shocks affecting both assets and liabilities. Following the perspective of commercial banks, we concentrate on information available in the risk management practice to propose an easy to implement statistical framework. We put in place this framework estimating its scenario generation parameters on Italian macro-economic time series from 1990 to 2009. Once applied to a stylized commercial bank, we compare the results of our approach to regulatory capital requirements. We emphasize the need for policy makers as well as risk managers, to take into account the entire balance sheet structure to assess banking solvency.

Integrated Bank Risk Modeling: A Bottom-Up Statistical Framework

In the last few years, according to the evolution of financial markets and the enforcement of international supervisory requirements, an increasing interest has been devoted to risk integration. The original focus on individual risk estimation has been replaced by the growing prominence of top-down and bottom-up risk integration perspectives. Following this latter way, we bring together different approaches developed in the recent literature elaborating a general model to assess banking solvency in both the long-run (economic capital) as well as in the short period (liquidity mismatching). We consider banking capability to face credit, interest rate and liquidity risks associated to macro-economic shocks affecting both assets and liabilities. Following the perspective of commercial banks, we concentrate on information available in the risk management practice to propose an easy to implement statistical framework. We put in place this framework estimating its scenario generation parameters on Italian macro-economic time series from 1990 to 2009. Once applied to a stylized commercial bank, we compare the results of our approach to regulatory capital requirements. We emphasize the need for policy makers as well as risk managers, to take into account the entire balance sheet structure to assess banking solvency.

Supervisory Colleges: The Global Financial Crisis and Improving International Supervisory Coordination

The current financial crisis has caused many governments and international bodies to reconsider the tools governments have used to supervise financial institutions, particularly those systemically important institutions with cross-border operations. This article describes and analyzes one of those tools – the increased use of supervisory colleges in regulating international banks. The article begins with a brief review of the use of supervisory colleges in the 1980s and 1990s and particularly the failure of supervisors to cooperate in detecting the massive fraud committed by managers of BCCI resulting in the one of the largest international bank failures of the 20th century. The article then analyzes and describes in detail the use of colleges in the European Union. The development of EU law and EU-wide agencies is discussed, particularly the Lamfalussy committees, the recommendations of the Larosiere report and the financial services legislation proposed by the European Commission creating three European supervisory authorities. The article also discusses the standards issued by the Basel Committee on Banking Supervision regarding the operations of supervisory colleges and the more recent emphasis of the newly empowered G-20 on the use of colleges as a tool to both improve supervisory cooperation and improve surveillance of individual financial institutions. Finally, the article highlights the limitations of supervisory colleges as decision-making bodies. The author argues for the need of an international resolution regime for financial institutions that would buttress the use of colleges of supervisors as a micro-prudential supervisory tool. Until such a regime consisting of harmonized substantive law is in place, the benefit of supervisory colleges will generally be limited to the improved exchange of micro-prudential information.

Reform of the London Stock Exchange: the prudential issues

In October 1986 the London Stock Exchange underwent what was termed the Big Bang. This consisted of the removal of fixed commissions on UK securities transactions, the abolition of the single capacity system, and the removal of barriers to entry to UK securities markets. The author considers five prudential issues raised by this event: monopoly power and foreign dominance, international supervisory harmonisation, capital adequacy and managerial competence, the management of 'fall out' (exit from the industry), and conflicts of interest. Three further factors are considered in detail; the regulator's approach to conflicts of interest, the regulation of financial conglomerates, and the implications of the Financial Services Act.