Model Of Financial Regulation Research Articles

National and International Financial Market Regulation and Supervision Systems: Challenges and Solutions

The purpose of this original study is to critically analyse the emergence and development of the national models of financial regulation, international standards and codes, and regional and national financial regulation and supervision (for the cases of the UK, USA, Sweden, the EU, and Finland). The research raises both academic and regulatory concerns. The relevance and purpose of this research arise from a need for an academic analysis of the economic nature and classification of financial market regulation systems. They represent a theoretical justification for changes in the policies and supervisory practices of national and international regulatory authorities in response to innovations in financial technologies and instruments, digital products, and risks. Secondly, it will stimulate more systematic work on regulatory databases, registration, and reporting procedures in various economies in different financial markets. The author identifies five main systems of national financial regulatory markets: the multi-tiered, multi-agency US system, the twin peaks model (UK), and the mega-regulatory model (Sweden). There is a thorough review of the international standards and institutions that work for the stability of financial systems. The analysis of the regional and national systems of financial regulation and supervision is based on the examples of the EU and Finnish institutions. National macro- and micro-economic regulation and supervision have been examined, with a focus on the US Federal Reserve and the US Treasury. An important result of the study is the systematisation of the directions of the development of national and international regulatory institutions (since the 1980s). First, the minimum capital and credit risk requirements for banks (the 1980s) were complemented in the 21st century by buffer reserves, liquidity, and leverage standards. Second, regulation focuses on ensuring the sustainability of the national economy. The regulatory focus is on ensuring the sustainability of national and global financial systems. Third, there is an increase in the number of supervised institutions. Fourth, there is a division of the functions between central banks (macro-economic regulation) and one or two mega-regulators (micro-economic regulation and supervision). Fifth, there is a division of labour between the international financial institutions (BIS, IMF, and WB) and national regulators. Sixth, the focus is on protecting consumers and investors and countering money laundering and the financing of terrorism. Seventh, there is an understanding based on a common approach by central banks to new financial technologies and cybersecurity.

НОРМАТИВНО-ПРАВОВЕ ТА ІНФОРМАЦІЙНЕ ЗАБЕЗПЕЧЕННЯ РЕГУЛЮВАННЯ РИНКУ ПОХІДНИХ ФІНАНСОВИХ ІНСТРУМЕНТІВ В УКРАЇНІ

The purpose of the article is to structure the legal framework for regulating the market of derivative financial instruments at the global and national levels, to harmonize them with each other and to identify current changes and problems. The article uses an economic and legal approach to the study of the problems raised. It has been established that the structure of regulation of the derivatives market consists of supranational and national levels. At the supranational level, global and regional financial market institutions determine the basic provisions for the functioning of the market; at the national level, it is regulated by legislative bodies, state regulatory bodies and self-regulatory organizations. The regulatory support of state bodies in the capital market is formed by instructions, standards and norms, methodological guidelines, explanations, rules, etc. The attention is focused on the important role of European supranational institutions as factors of adaptation of the Ukraine financial system to EU requirements. It has been established that the Ukrainian model of financial regulation is close to the “two peaks” model, in accordance with which the main functions are distributed between institutes – by the National Bank of Ukraine and the National Securities and Stock Market Commission. The functions and powers of all components of the derivatives market regulation system, including self-regulatory organizations, are considered. It is noted that in Ukraine derivatives trading outside the organized market is poorly regulated and requires the use of tools aimed at standardizing processes (General Agreement) and enhancing depository and clearing activities. The level of Ukraine derivatives market development is characterized as the active phase of the rule-making processes regulating. The legislative bodies have a decisive influence on the system of regulation of derivatives market at the national level. They form a legal framework and have a clear hierarchy. The key subjects of information support of the financial market are identified, their functions and the state of disclosure of information are determined, the main problems of the informational support require solution.

A comparative analysis of the Twin Peaks model of financial regulation in South Africa and the United Kingdom

This article examines the recent adoption of the Twin Peaks model by the United Kingdom and South Africa. An international and comparative analysis is provided. It observes that there is a gradual paradigm shift across the world towards the Twin Peaks model of financial regulation. There are slight variations in the design of the two countries’ Twin Peaks models. The variations in regulatory design indicate the flexibility of the Twin Peaks model and its adaptability to suit local conditions, regulatory culture, and the country’s specific needs. Therefore, while the South African model has drawn significantly from the experiences of other Twin Peaks jurisdictions, particularly the UK, South Africa has adopted the model to accommodate its own needs and unique characteristics. It is imperative for the success of the Twin Peaks model that it clearly delineates the objectives and functions of each regulator, and achieves effective co-ordination between them. This article warns that, given the potential overlaps and high levels of co-operation required between the different regulatory bodies in South Africa, there could be detrimental consequences if this complicated financial regulation regime is not properly managed.

Accountability in the twin peaks model of financial regulation in South Africa

The Financial Sector Regulation (FSR) Act 9 of 2017 implemented the first stage of the Twin Peaks model of financial regulation in South Africa. The Act established the Prudential Authority and the Financial Sector Conduct Authority to make the financial sector safer by using a more robust prudential and market conduct framework. The South African Reserve Bank received an enhanced mandate to promote and maintain financial stability. Since accountability is a core goal in financial regulation, this paper analyses the notion of accountability and specifically the accountability of the regulators in a Twin Peaks model of financial regulation. The legislative framework put in place by the FSR Act goes a long way in adhering to principles of accountability. The financial sector regulators are obliged to consult with various stakeholders such as the Minister of Finance and financial institutions. The regulators are subject to control measures, and Parliament holds them accountable. Nevertheless, the authors suggest that one more step is necessary. There should be more debate and engagement by the regulators with the general public to increase public knowledge of financial sector regulation in South Africa.

Shylocks or Legitimate Lenders? An Inquiry into the Regulation of Digital Lending in Kenya

The lending market in Kenya has seen a proliferation of digital lenders that are largely unregulated. The lenders provide seemingly cheap loans whose interest is huge when the Annual Percentage Rate (APR) is calculated. The lenders operate through apps that are uploaded to App Stores and pulled down at will. They require their customers to ‘accept’ terms and conditions before accessing the loans, and these terms sometimes allow the lenders unfettered access to customer data which they use and abuse in equal measure. The lenders use such customer data to threaten, to contact those on the contact lists of the customers’ phonebook, and to report them on Credit Reference Bureaus (CRBs). This paper seeks to examine the law on regulation of the digital lending environment in Kenya and to recommend the enactment of the Financial Markets Conduct Bill of 2018 which introduces elements of the Twin Peaks model of financial regulation. Key Words: Shylocks; digital lenders; data privacy; Annual Pricing Rate (APR); digital regulation; Twin-Peaks Model

SOME ASPECTS OF REGULATORY OPTIMIZATIONS IN THE FINANCIAL SECTOR

Rapid development of the high technologies sector undoubtedly reflects the present-day financial regulation. Innovations like blockchain, cloud computing and artificial intelligence underlie the foundations of newly appeared RegTech firms and SupTech initiatives and quickly appear in the toolbox of contemporary financial supervision. The article examines some key trends related to their involvement and implementation by financial institutions and supervisors. Several arguments supporting the thesis for gradual transition to a more integrated and interactive model of financial regulation, characterized by a change from institutional to platform financial regulatory infrastructure, are presented.

China’s long march towards the twin peaks model of financial regulation

ABSTRACT This article traces the evolution of China’s financial regulatory system, and its trend towards what could be referred to as a ‘quasi-Twin Peaks’ model. It then outlines the ongoing challenges with the current sector-based framework, including regulatory competition, regulatory arbitrage and inconsistent regulatory mandates. It then proposes a pathway by which China could adopt a true Twin Peaks model. Finally, the article outlines recent developments in consumer protection, and draws parallel with developments in two Twin Peaks jurisdictions: the UK and South Africa. The article concludes by arguing that the adoption of an overarching framework for consumer protection in banking products and payment services underscores the need for a unified framework that applies to all products and services in the financial sector, including those administered by the CSRC in the securities sector. It also highlights the benefits of separating market conduct and consumer protection regulation, from macro-prudential and micro-prudential regulation, and provides additional support for the argument that the ultimate destination to which China should march, is the Twin Peaks model of financial regulation. This would be in line with the emerging direction of China’s regulatory agency reform, and would better accommodate ongoing financial innovation and cross-sector cooperation and integration.

Financial Crisis Management Under the Twin Peaks Model of Financial Regulation – Australia and the UK Compared

Financial Crisis Management Under the Twin Peaks Model of Financial Regulation – Australia and the UK Compared

Research on Fintech, Regtech and Financial Regulation in China<br/>—Taking the “Regulatory Sandbox” of Beijing Fintech Pilot as the Starting Point

This article takes the Chinese version of the “regulation sandbox” officially launched in Beijing on December 5, 2019 as the starting point for research. First, it analyzes the development trend of Fintech and the basic situation of domestic Fintech development. Then, by combing the current development trend of China’s Fintech to the challenges brought by financial regulation and the stable operation of the financial industry, it is pointed out that under the situation of network and distributed application of Fintech, improving the capability of Regtech can promote the change of financial regulation model; Finally, in combination with the main regulatory scientific and technological means that have been implemented with the development of financial technology in the world, this paper puts forward relevant policy suggestions on improving the financial Regtech framework in China.

Reform and evolution of finance in China: evidence from China’s reform and opening-up in the past 40 years

Over the past 40 years since the launch of reform and opening-up, China’s finance has undergone substantial and fundamental changes in terms of size, structure and pattern as well as function, competitiveness, and international influence. Therefore, an accurate and comprehensive understanding of the current situation of China’s finance and its history in the last four decades is a prerequisite for deepening the reform and opening-up of finance and a foundation for establishing a modern financial system in China. This paper reviews the historical evolution of China’s finance over the past 40 years, focussing on the volume and market share of different types of financial assets, financing tools and mechanisms, patterns in and functions of finance, the risk structure in the financial system, financial opening, and the financial regulation model. It further proposes that in the future, China should establish a modern financial system characterised by ‘large-economy finance’.

Prognostic models of financial regulation of territorial communities budgets

Actuality of research theme. The problem of development of effective control system by finances of territorial communities acquires in the modern terms of decentralization of the special actuality. Raising of problem. One of basic problems of process of decentralization there is conditioning for providing of financial firmness and all-sufficientness of territorial communities. Analysis of the last researches and publications. The modern aspects of decision of problems of development of territorial communities and local self-government such scientists engage in, as Pavliuk A.P., Oliinyk D.I., Batalov O.A., Datsko O.I., Murkovych L. L., Molodozhen Yu.B.and other [1-4]. The results of own researches of problem are in to [5-11]. Selection of unexplored parts of general issue. In spite of changes to the Budgetary and Tax codes, there are mechanisms that restrain development of the incorporated territorial communities and create the threat of them to financial possibility. One of such mechanisms there is a base and reversible grant. Their influence on the financial state of incorporated territorial communities needs a separate analysis and research. Raising of task, research aim. There is a necessity of analysis of influence of the operating system of interbudgetary mutual relations on the financial state of the incorporated territorial communities. Method or methodology of realization of research. In the process of realization researches drawn on scientific (analysis and synthesis, induction and deduction, analytical grouping) and special (abstracting, economical-mathematical design, etc.) methods of study of the economic phenomena and processes. Exposition of basic material (job performances). In-process the conducted analysis of indexes of efficiency of reform of administrative-territorial device that takes place in Ukraine from 2015. It is shown that during 2014 - 2017 as a result of decentralization is positive tendencies in relation to the improvement of the financial state of the incorporated territorial communities. It is well-proven that the positive results of decentralization of management were attained in 2014 - 2016 and conditioned by active sponsorship of reforms. Negative progress of communities trends in 2017 it maybe to explain that the accumulation of unsolved problems took place during a previous period. It is shown that such support is envisaged during five years - 2020 to and that is why there is a necessity of creation within the limits of incorporated territorial communities of financial mechanisms of their break-even functioning. It is well-proven that the new mechanism of the budgetary smoothing negatively influences on financially solvent communities, restrains their development because of exception of money in the State budget with simultaneous artificial support of financially helpless communities due to a base grant. It offers to define the possible limits of reversible grant in intercommunication with the rates of increase of acuestss on one habitant of incorporated territorial communities. The model of determination of limits of reversible grant offers in intercommunication with the rates of increase of acuestss on one habitant incorporated territorial communities, confirmed by calculations on the basis of official statistical figures. Industry of application of results. The got practical results can be drawn on by incorporated territorial communities in the process of development of politics of receivership and by the charges of budget. Scientific results can be drawn on at teaching of disciplines of economic aspiration. Conclusions. Unefficiency of operating mechanism of the interbudgetary adjusting is well-proven, as he creates terms in order that not putting the certain regions of country efforts, functioned due to base grants. At the same time regions that provide the stable indexes of the economic development appear in a situation, when the further increase of their potential a reversible grant interferes with, as after her help part of facilities is withdrawn from the budget of incorporated territorial communities.

Фінансове регулювання розвитку територіальних утворень: методи та інструменти

Досліджено проблему фінансового забезпечення соціального, економічного та екологічного розвитку територіальних громад України в умовах децентралізації влади; запропоновано нові підходи до визначення взаємовідносин державного бюджету з місцевими бюджетами; визначено джерела фінансових ресурсів території та проаналізовано можливості їх залучення; здійснено огляд наукових підходів українських вчених-економістів щодо класифікації джерел фінансового забезпечення територіальних громад; доведено що вирішальна роль у забезпеченні розвитку територіальних утворень належить державі та її соціально-економічній політиці щодо збалансованого розвитку економічно відсталих та слаборозвинених територій. Досліджено сучасний інструментарій фінансового регулювання розвитку територіальних утворень в умовах децентралізації; проведено класифікацію інструментів фінансового забезпечення розвитку територій на бюджетні та позабюджетні; обґрунтовано необхідність залучення додаткових джерел фінансових ресурсів у територіальні утворення; розроблено механізми залучення потенціалу фінансово-кредитних установ території, фондового та страхового ринків для фінансування програм регіонального розвитку; розроблено механізм залучення інвестиційних ресурсів для фінансування програм регіонального розвитку; запропоновано ефективні методи формування, розподілу і перерозподілу фінансової бази регіону; систематизовано кількісні та якісні параметри фінансового забезпечення збалансованого розвитку.

Regulatory Cycles: A Political Economy Model

Financial regulatory policy in the U.S. has been conspicuously pro-cyclical over the last two decades. The 2000s financial boom coincided with a period of financial deregulation and the post-crisis response, a massive scaling up of regulation, was largely implemented during an economic downturn. Many argued that these regulatory waves were excessive. More recently, there are strong signs of a move toward deregulation, at a time of a booming economy and stock market. A closer look at historical financial boom-bust cycles suggests that, in fact, pro-cyclicality in financial regulation is a common and recurring pattern. This paper combines a signaling model of elections with a simple financial regulation model to study how public opinion, financial innovation, and policy-makers incentives shape financial regulation. While changes in voters' perceptions of financial innovation alone can generate a pro-cyclical pattern, we show that this cyclicality can be significantly amplified by politicians' electoral incentives: Both over-regulation and under-regulation can naturally arise in equilibrium, and small changes in public opinion can induce large regulatory shifts.

Rethinking the Philippine Financial Market Regulatory Model for Market-Based Credit Intermediation

The Philippines was one of the first countries in Asia to embark on a series of reforms which targeted capital market development and financial liberalization in the 1980s. It was very much on its way towards international financial integration when the 1997 Asian Financial Crisis (AFC) tempered this development. As a consequence, commercial banking assets still account for a majority of the total financial assets in the Philippines and traditional bank lending remains the primary mode of financing. However, change is coming. Estimation reveals that the country needs approximately US$110 billion to cover its infrastructure needs between 2013 and 2020. While the public sector can still be counted on to provide a lion’s share of this funding need, a tight fiscal space prevents it from solely fulfilling the investment target. As stricter banking regulations have raised the cost of borrowing and shrunk availability of capital in some cases due to borrower limits, the urgency brought by this infrastructure financing gap has given rise to calls to shift towards market-based credit intermediation. However, as local banks move into this space as a result of government reforms, new risks could possibly arise which the present framework of the institutional separation between banks and securities regulation might be ill-equipped to deal with. The purpose of this paper is to assess the capacity of Philippine financial regulators to cope with new risks as the country shifts from bank-based credit intermediation to a market-based one. Specifically, this paper shall attempt to answer whether the traditional separation between banking and securities regulation will still work under a changing financial landscape or whether there will be a need to shift towards a goal-oriented or functional model of financial regulation? This problem is not only relevant in the Philippine context but is also important for other developing countries which are attempting similar reforms.

Australia’s Trek towards Twin Peaks – Comparisons with South Africa

This paper traces the evolution of the Twin Peaks model of financial regulation in Australia, outlines certain key aspects and draws comparisons with the model that is being implemented in South Africa. It also highlights ongoing areas of debate in Australia and what the debate reveals about the operation of the Twin Peaks model generally.

Global finance as a politicized habitat

AbstractPredominant models of financial regulation based on representative agents—in both the public interest and public choice traditions—assume that competitive pressures in financial markets undermine prudential behavior by firms in the absence of regulation. One empirical expectation of these models is behavioral: firms should adjust their risk-taking behaviors in response to the regulatory environment they face but should not over-comply with regulations. That is, the central tendency of bank behaviors should hew closely to regulatory minima and the variance should be small. I first demonstrate that this expectation is not borne out by the empirical record and then advance a theoretical argument that does not rely on a representative agent model. I argue that firms face a range of incentives from markets and governments that condition their risk-taking behaviors, and firms choose a “preferred habitat” within a market structure. Some of these incentives are towards greater risk-taking, while others are in the direction of greater prudence. This framework provides opportunities for examining financial market actors in a realistic context, and offers ways to unify micro-level and structural analyses of the political economy of global finance.

A Reverse Mortgage over the Family Home as a Panacea for Ageing Societies? Comparative Lessons from Japan

This article evaluates the rise of the reverse mortgage as a means for senior citizens to convert equity in family homes into retirement income. It explains reverse mortgages in general terms and outlines the risks and potential benefits of this increasingly popular financial product to assess first, whether the product can be successfully regulated, and second, whether the product is desirable from a wider public policy perspective. The article first compares the regulation of reverse mortgages in the UK, the USA, and Australia. It outlines three models of regulation: minimalist, interventionist, and procedural. The article then evaluates the regulation of reverse mortgages in Japan in its specific legal and economic context. It detects there a recent increase in uptake correlated with a relatively low degree of regulation. It finds that the Japanese reverse mortgage market is ripe for the emerging procedural model of financial regulation, but this depends on surmounting significant political and logistical hurdles. The article then examines Japanese alternatives to reverse mortgages that may provide a more satisfactory means of providing secure housing and retirement income for senior citizens in Japan and other jurisdictions. The article concludes that, in the absence of regulation that genuinely safeguards the interests of consumers, these alternatives are far less risky and are equally compelling from a public policy perspective.

The institutional framework of the new financial regulation model in the european union

The economic crisis, which has been with us since 2008, has called into question the supervision and financial regulation model in the European Union (EU). The economic governing system, which was born after the creation of the European Economic and Monetary Union (EEMU), has been shown to be clearly insufficient in order to deal with the impact of the recession which has hit the twenty seven Member States of the EU. This situation has illustrated the need for a wider cooperation between the States, some supervisory institutions with a more systematic vision and a better designed and more specific financial system. The objective of this article is to analyze the modifications which have been made to the supervision model of the European financial system, the problems which have resulted and the lines of improvement which must be studied if the intention is that the supervision model of the European financial system is going to be a trustworthy, efficient and effective model in the future. To do this, the changes in the renovation of the financial supervision model in the EU, which have been made since 2011, will be studied. In the first place, the macro-prudential and microprudential supervision through the restructuring of the three fundamental bases of the financial system will be analyzed: banking system, market values and insurance. Secondly, a critique of the model will be carried out and the most problematic points of the system will be outlined in order to highlight areas which need improving and finally, the conclusions will be presented.

A Jurisdictional Comparison of the Twin Peaks Model of Financial Regulation

The last two decades have seen an increasing number of jurisdictions adopting the ‘twin peaks’ model of financial regulation. Since it was pioneered in Australia, the model has been adopted by the Netherlands, Belgium, New Zealand and the United Kingdom. South Africa is currently in the process of changing its model, and it has also been considered by the US. This paper evaluates the twin peaks model as it has been adopted in these jurisdictions and investigates the extent to which there is uniformity in its design and implementation from a regulatory perspective. The comparative analysis indicates that there are many variations in the design of a twin peaks model and that there is no archetypal twin peaks model. In particular, choices need to be made around key elements in areas such as structural design, operational independence and regulatory coordination.

A jurisdictional comparison of the twin peaks model of financial regulation

The last two decades have seen an increasing number of jurisdictions adopting the ‘twin peaks’ model of financial regulation. Since it was pioneered in Australia, the model has been adopted by the Netherlands, Belgium, New Zealand and the United Kingdom. South Africa is currently in the process of changing its model, and it has also been considered by the US. This paper evaluates the twin peaks model as it has been adopted in these jurisdictions and investigates the extent to which there is uniformity in its design and implementation from a regulatory perspective. The comparative analysis indicates that there are many variations in the design of a twin peaks model and that there is no archetypal twin peaks model. In particular, choices need to be made around key elements in areas such as structural design, operational independence and regulatory coordination.