Risk-based Regulation Research Articles

Risk-based regulation and supervision of second-tier banks: experience of EU countries

The aim of the study was to determine the impact of increased capital adequacy standards of second-tier banks on their performance. The study is based on second-tier banks of EU member states, as these countries are the first to implement the Basel Committee recommendations, so their experience should be studied and taken into account when building risk-based regulation of second-tier banks of Ukraine and Kazakhstan. The study covers the period of 2009–2022, as the Basel III regulations were adopted after 2008, and they began to operate for the second-tier banks of EU member states in 2013. The study was conducted using econometric modelling with an analysis of the dependence of banking indicators on the capital structure established by Basel III. Functional interrelationships of the dependence of Net Interest Income, Profit, Return on Assets, Return on Equity, Risk Costs to Operating Income were tested. The impact of capital adequacy requirements on the performance of second-tier banks was determined: capital adequacy requirements have a positive impact on net interest income and profit of second-tier banks. The obtained results can be used to substantiate increasing capital adequacy requirements to increase the reliability of the banking system as an element in the system of factors of economic growth of the national economy.

Food Contamination with Micro-plastics: Occurrences, Bioavailability, Human Vulnerability, and Prevention

Abstract: Microplastics (MPs) are emergent environmental contaminants that are designated as either primary or secondary dependent on their origins. Formulation, morphology, dimensions, and colour scheme, along with other features, are connected with their propensity to reach the food webs and their dangers. Whilst ecological adversities of MPs have drawn considerable interest, the hazards to individuals from dietary exposure have yet to be determined. The aim of this review is to gauge existing understanding concerning MPs in foodstuffs and to explore the problems and inadequacies for threat assessment. The prevalence of MPs in foodstuffs and sugary drinks has been detected all over the world, but most researchers judged the existing information to be not only inadequate but also of dubious value, owing to the notable lack of agreement on a regulated quantification methods and a consistent appellation. Most published papers have highlighted potable water and condiments such as sugars, salts, and nectar as significant food components of MPs for humans. The threat assessment reveals significant discrepancies in our understanding of MP toxicity for human consumption, which hinders the estimate of risk-based regulations regarding food safety. The lack of comparators for evaluating MPs food consumption prohibits dietary MPs risk description and risk mitigation. Researchers and Food Safety Administrators confer various obstacles along with possibilities linked to the appearance of MPs in foodstuffs. Further investigation on the MPs categorization and exposures is essential considering that any subsequent threat evaluation record can contain a comprehensive dietary viewpoint.

Bayesian network analysis of risk classification strategies in the regulation of cellular products

Cell therapy, a burgeoning therapeutic strategy, necessitates a scientific regulatory framework but faces challenges in risk-based regulation due to the lack of a global consensus on risk classification. This study applies Bayesian network analysis to compare and evaluate the risk classification strategies for cellular products proposed by the Food and Drug Administration (FDA), Ministry of Health, Labour and Welfare (MHLW), and World Health Organization (WHO), using real-world data to validate the models. The appropriateness of key risk factors is assessed within the three regulatory frameworks, along with their implications for clinical safety. The results indicate several directions for refining risk classification approaches. Additionally, a substudy focuses on a specific type of cell and gene therapy (CGT), chimeric antigen receptor (CAR) T cell therapy. It underscores the importance of considering CAR targets, tumor types, and costimulatory domains when assessing the safety risks of CAR T cell products. Overall, there is currently a lack of a regulatory framework based on real-world data for cellular products and a lack of risk-based classification review methods. This study aims to improve the regulatory system for cellular products, emphasizing risk-based classification. Furthermore, the study advocates for leveraging machine learning in regulatory science to enhance the assessment of cellular product safety, illustrating the role of Bayesian networks in aiding regulatory decision-making for the risk classification of cellular products.

Impact of Financial Regulations on Bank Profitability in Uganda

Purpose: The aim of the study was to assess the impact of financial regulations on bank profitability in Uganda. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Financial regulations significantly influence bank profitability, primarily by affecting operational costs, risk management practices, and lending activities. Stricter capital requirements, such as those imposed by Basel III, generally enhance financial stability but may reduce profitability by limiting leverage and increasing the cost of compliance. Regulatory measures aimed at consumer protection and transparency, while beneficial for market integrity, can also impose additional administrative burdens and costs on banks. Conversely, deregulation periods often see increased profitability due to relaxed constraints on lending and investment activities. However, this can come at the expense of higher risk exposure and potential financial instability. Overall, the balance between regulatory stringency and bank profitability hinges on the specific regulations in place and the banks' ability to adapt and innovate within those frameworks. Implications to Theory, Practice and Policy: Agency theory, capital structure theory and information asymmetry theory may be used to anchor future studies on assessing the impact of financial regulations on bank profitability in Uganda. Practitioners should advocate for risk-based regulation that tailors regulatory requirements to banks' risk profiles and systemic importance. Policymakers should prioritize efforts to harmonize financial regulations across jurisdictions, especially in global banking hubs.

Regulation of artificial intelligence in Brazil: examination of Draft Bill no. 2338/2023

This article aims to explore the challenges faced by Brazilian Draft Bill no. 2338/2023 in its purpose to implement risk-based regulation of artificial intelligence in Brazil. Based on the inspiration received from the European AI Act, the article describes the Brazilian classification of risks and its impacts for the regulation, the governance rules, the practical application of principles of prevention and precaution, and the administrative and civil liability.

Possible harms of artificial intelligence and the EU AI act: fundamental rights and risk

Various actors employ the notion of risk when they discuss the future role of Artificial Intelligence (AI) in society – sometimes as a general pointer to possible unwanted consequences of the underlying technologies, sometimes oriented towards a political regulation of AI risks. Mostly discussed within a legal or ethical framework, we still lack a perspective on AI risks based on sociological risk research. Building on systems-theoretical thinking about risk and society, this article analyses the potential and limits of a risk-based regulation of AI, in particular with regard to the notion of harm to fundamental rights. Drawing on the AI Act, its earlier drafts and related documents, the paper analyses how this regulatory framework delineates harms of AI and which implications the chosen delineation has for the regulation. The results show that fundamental rights are invoked as legal rules, as values and as a foundation for trustworthiness of AI in parallel to being identified as at risk from AI. The attempt to frame all possible harms in terms of fundamental rights creates communicative paradoxes. It opens the door to a political classification of high-risk AI systems as well as a future standard-setting that is removed from systematic concerns about fundamental rights and values. The additional notion of systemic risk, addressing possible risks from general-purpose AI models, further reveals the problems with delineating harms of AI. In sum, the AI Act is unlikely to achieve what it aims to do, namely the creation of conditions for trustworthy AI.

АНАЛИЗ РЕЗУЛЬТАТОВ ВНЕДРЕНИЯ РИСК-ОРИЕНТИРОВАННОГО ПОДХОДА В КОНТРОЛЬНО-НАДЗОРНОЙ ДЕЯТЕЛЬНОСТИ В СФЕРЕ ТРУДА

Federal Service for Labour and Employment (Rostrud) adopted risk-based regulation and enforcement principles by installing a system of inspections targeted according to the object’s risk profile. However, the criteria that are used to evaluate the object’ risk ranking and to assign risk categories have not been revised since 2017. The purpose of this study is to analyze the Rostrud inspection prioritization system in 2017-2023, identify its weaknesses and evaluate how external factors (two periods of inspection moratoria, introduction of prophylactics measures) affected the results of inspection activity. Statistical analysis based on data obtained from Rostrud, Federal State Statistics Service, SPARK-Interfax, Unified register of control (supervisory) measures and Unified register of inspections, demonstrates that companies have been moved from one risk group to another intensively during 2017-2023 (about 15% of them have changed the risk category drastically during only one year of observation). It also has revealed the number of shortcomings in Rosrtud risk evaluation methodology that led to estimation bias and miscategorization of supervised organizations. At the same time, the connection between both prophylactics and inspection prioritization and risk category is weak, while their results have little influence on risk category revision. The study resulted in recommendations about ways the risk categorization methodology can be improved with minimal additional costs.

인공지능 규제

Artificial intelligence (AI), the key technology in the Fourth Industrial Revolution, is expected to bring numerous socioeconomic benefits, but there are also concerns about its adverse effects. This study aims to explore policy options for building trust in AI and discuss their limitations. Specifically, we analyze the EU and US approaches to creating so-called “trustworthy AI” and draw policy implications for South Korea. The EU's approach to overcoming differences in socioeconomic maturity, government capacity, and institutional context among its member states is both normative and centralized. On the other hand, the United States, which aims to maintain its technological hegemony, has taken a light-touch approach to promoting the AI industry by granting discretionary authority to sectoral regulators while encouraging private sector autonomy. The changing environment calls for a full-scale discussion on AI regulation in Korea. In this paper, we point out that it is essential to consider regulatory arrangements that include at least three elements: risk-based regulation, co-regulatory framework, and harmonization with international standards. We conclude by discussing policy options and limitations.

Assessing the environmental fate of rAAV in activated sludge and water: Implications for environmental risk assessments and GMO regulatory frameworks

During the past +20 years, recombinant adeno-associated virus (rAAV) vectors have emerged as the primary vehicle of choice for in vivo gene therapy. rAAV vectors are classified as genetically modified organisms (GMOs), therefore specific biosafety laws apply regarding their use. Environmental agencies participating in the review of clinical trial applications involving viral-based gene therapies (eg based on AAV) focus among other phenomena especially on shedding, a mechanism by which rAAV vectors exit a patient's body and enter the natural environment. For example, following patient use, shed viral particles excreted in urine and feces enter the wastewater treatment facility (WWTF) and subsequently may be released into the natural environment through wastewater effluent discharges. Based on basic molecular biology, it is generally assumed by the scientific community that shed rAAV particles will undergo degradation during the wastewater treatment process. However, despite their importance and increase in use during the last few decades, actual data to support our understanding of the environmental fate of shed rAAV vector particles is unavailable. Data to support this assumption would greatly enhance our knowledge and understanding of degradation kinetics associated with rAAV in the environment. Such data would also provide strong scientific support for changes in current legislation regarding the medicinal use of GMOs. Therefore, the goal of this research was to conduct laboratory experiments to assess the actual environmental fate of rAAV virions.In this study the stability of 4 different rAAV vectors (based on wildtype (wt) AAV serotypes 2,3,6,9) was assessed during incubation in activated sludge (containing live microorganisms). This setting corresponds to conditions as encountered in WWTFs, and has been used in order to assess rAAV fate under environmentally relevant conditions, to gain a better understanding of the general environmental risk posed by shed rAAV particles. The amount of detectable virions in the supernatant, as measured by sensitive and specific qPCR, rapidly decreased within hours and continued to decline, reaching the lower limit of quantitation prior to or by study termination on day 7. Furthermore, a half-life of approximately 7 days for rAAV virions was determined under abiotic conditions, during a room temperature incubation experiment of rAAV vectors in water in the absence of any microbiota or sludge.The findings from this study provide the first insight of its kind into the actual environmental fate of shed rAAV particles, and help the community to better understand the potential impact of rAAVs on the environment. It has become evident now that shed particles are not equipped to remain stable and/or soluble once entering a typical WWTF and therefore do not pose a threat to the natural environment. These findings support a data-driven approach towards a simplified, risk-based regulation of medicinal GMOs in the EU and other regions.

Advanced therapy medicinal products in China: Regulation and development.

Advanced therapy medicinal products (ATMPs) have shown dramatic efficacy in addressing serious diseases over the past decade. With the acceleration and deepening of China's drug regulatory reforms, the country sees a continuous introduction of policies that encourage drug innovation. The capacity and efficiency of the Center for Drug Evaluation (CDE), National Medical Products Administration have significantly improved, where substantial resources have been allocated to ATMPs with major innovations and outstanding clinical values that satisfy urgent clinical needs. These changes have greatly stimulated the research and development of biological products in China, ushering in a period of explosive growth in the number of investigational new drug (IND) applications of ATMPs. Here, we described China's ATMP regulatory framework and analyzed data on IND applications for ATMPs submitted to CDE. The data show that China's ATMP industry is expanding dramatically, but lagging behind in terms of the innovative targets and the coverage of indications. However, in recent years, the diversity of product types, targets, and indications is growing. We discussed challenges and opportunities in ATMP regulation. Risk-based regulation and cross-discipline collaborations are encouraged to promote more ATMPs toward market authorization in China.

The applicability of the European GMO legislation to epigenetically modified organisms.

In addition to classic genetic engineering for the targeted modification of the base sequence of the DNA, epigenetic methods for the targeted modification of the genetic material without base changes are increasingly being used. Such epigenetic techniques can be used, for example, to influence stress tolerance to heat or aridity in plants. The regulatory handling of organisms generated by means of epigenetic techniques on the grounds of genetic engineering law has not yet been clarified. This paper critically reviews the legal classification of epigenetically modified organisms as GMOs as expressed in the study on New Genomic Techniques published in April 2021 by the European Commission. The paper shows that there are reasons to assume that epigenetically modified organisms are not covered by the European GMO legislation. In addition, the paper provides an introductory overview of the significance of epigenetics and the methods used to intentionally influence epigenetic traits and illustrates the possibility for a consistent, risk-based regulation of epigenetic modifications.

Risk-based Regulation of Russian Universities: Risk Indicators and Their Use for State Control Purposes

The article is devoted to the identification and analysis of indicators of the risk of low-quality education in Russian universities. In 2021-2022, the approach to higher education inspections has changed significantly: accreditation monitoring has been introduced, it includes eight indicators. However, this monitoring was formed by the expert community, so the results of its testing in practice have yet to be analyzed. The purpose of this work is to identify risk factors for estimation the likelihood of violations of mandatory requirements by universities, and to develop recommendations for expanding the set of risk indicators included in accreditation monitoring. The main methods used in the work are methods of quantitative analysis, including econometric modeling. The novelty of the work is determined by the approach used: risk indicators are identified using a quantitative econometric analysis of data on the observed characteristics and results of inspections of Russian universities in 2015-2019. The results of the study indicate the possibility of supplementing the set of accreditation monitoring indicators. As additional indicators, first of all, various characteristics of research activities of universities can be used. Such a change in accreditation monitoring will increase its effectiveness as a preliminary assessment tool used in the implementation of a risk-based approach to state control. In cases where the assessment of even extended monitoring is ambiguous, the quantitative model proposed by the authors can be used.

Occupational injuries and extreme heat: An analysis from the hot desert climate of Kuwait

Background–Temperatures in the harsh summer times of Kuwait commonly exceed 40°C during the day. Since 2015, a ministerial law banned employees from working under the sun (11am to 4pm) from June 1st to August 31st of every year. The vast majority of the affected employees are migrant workers in outdoor jobs such as construction and hospitality. Aim–We assessed the risk of occupational injuries associated with outdoor extreme hot temperatures during the summertime ban period in Kuwait. Methods–We collected daily occupational injuries that are reported to the Ministry of Health’s Occupational Health Department for five years from 2015 to 2019. We examined counts of occupational injuries during the same summertime ban period from June 1st to August 31st in each of the five years. We fitted generalized additive models with a quasipoisson distribution in a time series design. A 7-day moving average of daily mean temperature was modelled with penalized splines adjusted for relative humidity, time trend and day of the week. Results–During the June-August summertime ban, the daily average temperature was 39.4°C(±1.8°C). There were 7.2, 7.6 and 9.4 reported injuries per day in the summer months of June, July and August, respectively. The exposure-response relationship was S-shaped with a decrease in risk at very extreme hot temperatures. Compared to the 10th percentile of summer temperatures in Kuwait (37.4°C), the average day with a temperature of 39.4°C increases the risk of injury by 1.38-fold (95% confidence intervals: 1.30-1.46). Similarly, temperatures of 40°C and 41°C were associated with relative risks of 1.41 (1.33-1.49) and 1.34 (1.21-1.49), respectively. The risks leveled off at 42°C (relative risk 1.21; 0.93-1.57). Conclusions–We found substantial increases in occupational injury risk from extremely hot temperatures despite the summertime ban in Kuwait. Calendar-based rather than heat- or risk-based regulation may be inadequate to provide occupational protections for migrant workers.

Corporate Non-Financial Reporting in the UK: Diversions from the EU Sustainability Reporting Framework

In late 2019, the European Union presented the EU Green Deal, which targets climate neutrality by 2050. Under the EU Green Deal’s Corporate Sustainability Reporting Directive (CSRD), a clear sustainability reporting and assurance framework was proposed as a significant aspect of the EU Sustainable Finance Package in 2021. However, because of its exit from the EU in 2020, the UK will cease to adopt EU legislations and will have to produce its own laws to achieve climate neutrality. Against this backdrop, the purpose of this paper is to explore how best to improve the non-financial reporting mechanism in the UK, in order to assist the UK in transitioning to a more sustainable economy. This paper investigates the unique challenges for non-financial reporting in the UK caused by Brexit, and the significance and effectiveness of risk-based regulation approach in the UK. The paper proposes a ‘really responsive’ industry-based non-financial reporting framework for the UK to address its unique challenges.

The European risk-based approaches: Connecting constitutional dots in the digital age

In recent years, risk has become a proxy and a parameter characterizing EU regulation of digital technologies. Nonetheless, EU risk-based regulation in the digital age is multi-faceted in the approaches it takes. This article considers three examples: the General Data Protection Regulation; the proposal for the Digital Services Act; and the proposal for the Artificial Intelligence Act. These three instruments move across a spectrum, from a bottom-up approach (the GDPR) to a top-down architecture (the AI Act), going through an intermediate stage (the DSA). It is argued, however, that despite the different methods, the three instruments share a common objective and project: they all seek to guarantee an optimal balance between innovation and the protection of rights, in line with the developing features of European (digital) constitutionalism. Through this lens, it is thus possible to grasp the “fil rouge” behind the GDPR, the DSA and the AI Act as they express a common constitutional aspiration and direction. risk-based approach, EU law, constitutional law, digital constitutionalism, digital technologies

Redacted]: This Article Categorised [Harmful] by the Government

By Edina Harbinja and Mark R. Leiser. In April 2019, the UK Government’s DCMS released its White Paper for ‘Online Harms’, which would establish in law a new duty of care towards users by platforms to be overseen by an independent regulator. Our earlier research outlines how we got to this point, sets out what the White Paper proposes, and criticises its key aspects. Our objections and criticism remain applicable to the UK Government’s Online Safety Bill. The Parliament is now scrutinising the Bill. The House of Lords Report sparked some optimism that the scrutiny could address critical concerns around free speech in particular. The Draft Online Safety Bill Joint Committee Report, however, suggest otherwise. This paper returns to key arguments as to why risk-based regulation and duty of care are not appropriate for policing content and expression online. We focus on the human rights implications of the Bill, in particular, the provider duties to ‘handle’ legal but harmful content. Here, we reemphasise the vague conceptualisation and nature of this harm, as well as the inadequate duties attached to it. We argue that the independence of OFCOM cannot be guaranteed.

Release of Sterile Mosquitoes with Drones in Urban and Rural Environments under the European Drone Regulation

In recent years, several countries have developed the use of sterile insect techniques (SIT) to fight against mosquitoes that transmit diseases. From a technical and economic point of view, the use of drones in the aerial release of sterile mosquitoes leads to important improvements in aerial coverage and savings in operational costs due to the requirement of fewer release sites and field staff. However, these operations are under the European drone regulation, one of the most advanced in the world. The main contribution and novelty of this paper with respect to previous work is the analysis of the SIT application with drones under the European risk-based regulation in two scenarios: urban and rural areas. The specific operations risk assessment (SORA) methodology has been applied to assess the risk of drone operations in these scenarios. The paper presents the operational requirements for aerial release of mosquitoes with drones along with the regulatory considerations that must be applied. Finally, an overview of the conditions in operation that could relax risks and mitigation measures is also discussed.

Risk-Based Regulations in Credit Markets: A Heterogeneous Financial Accelerator

Risk-Based Regulations in Credit Markets: A Heterogeneous Financial Accelerator

Accommodating Evidence of Traditional Use for Medicines Within Risk-Based Regulation in Australia

Accommodating Evidence of Traditional Use for Medicines Within Risk-Based Regulation in Australia

Risk of regulatory failure of “risk-based regulation” while using enterprise risk management as a meta-regulatory toolkit

PurposeDebate is growing around the expansion of risk-based regulation. The regulation scholarship provides evidence of regulatory failure of the risk-based approach in different domains, including financial regulation. Therefore, this paper aims to provide cautionary evidence about the risk of regulatory failure of risk-based strategy in the financial regulation while using enterprise risk management (ERM) as a meta-regulatory toolkit.Design/methodology/approachBased on interview data gathered from 30 risk managers of banks and five regulatory personnel, combined with secondary data, this study mainly explores the challenges for meaningful use of ERM based self-regulation in regulated banks. The evidence helps to assess the risk of regulatory failure of the risk-based regulation while using ERM.FindingsThe evidence reflects that regulated banks face diverse challenges arising from both peripheral and internal environments that limit the true internalization of ERM-based self-regulation. Despite this, the regulator uses this self-regulation as a meta-regulatory toolkit under the risk-based regulation to achieve the regulatory aims. However, the lack of true internalization of ERM based self-regulation is likely to raise the risk of regulatory failure of risk-based regulation to achieve the regulatory goals. Risk-based regulation is an evolving strategy in the regulatory regime. Therefore, care should be taken while using ERM as a regulatory toolkit before relying on it substantially.Originality/valueThe paper provides empirical insights about the challenges for effective use of ERM as a meta regulatory toolkit that might be useful practically both to the regulators and regulated firms.