Supervisory Framework Research Articles

Regulatory Influence on Market Conditions in the Banking Union

This paper looks into the specific influence that the European banking union will have on (future) bank client relationships. It shows that the intended regulatory influence on market conditions in principle serves as a powerful governance tool to achieve financial stability objectives.From this vantage, it analyzes macro-prudential instruments with a particular view to mortgage lending markets – the latter have been critical in the emergence of many modern financial crises. In gauging the impact of the new European supervisory framework, it finds that the ECB will lack influence on key macro-prudential tools to push through more rigid supervisory policies vis-a-vis forbearing national authorities.Furthermore, this paper points out that the current design of the European bail-in tool supplies resolution authorities with undue discretion. This feature which also afflicts the SRM imperils the key policy objective to re-instill market discipline on banks’ debt financing operations. The latter is also called into question because the nested regulatory technique that aims at preventing bail-outs unintendedly opens additional maneuvering space for political decision makers.

Home Security Service Enhanced with Information Stations

This research enhances a home security service with information stations. The service is based on a web-based multiple stations supervisory control framework. A service server (or cloud) kept in a company to serve numerous homes for security monitoring. Arduino controllers are used as home security controllers. An Arduino controller senses door switch, motion detection, smoke detection, gas detection, CO detection, an emergency button, RFID tag, and a spare sensing contact. The controller also drives door lock, two relays to perform security task. RFID is used to help personnel in/out management and alert enable/disable. The controller reads inputs, uploads input/output data to the service server, executes commands from the server, and drives output continuously. Camera servers are added to a house to provide video surveillance. Camera alert events are sent to the service server. Information stations, like earthquake alert station and weather station, are established in the server to provide environmental information. Users can subscribe certain information data and put them in the control laws of the Arduino controllers with condition control. With input/output authorization, the home security of one user is associated with others. Therefore, the whole security service forms a social security group.

The Regulatory and Supervisory Framework of Microfinance: Some Evidence from Sudan

Islamic microfinance is one of the essential unconventional branch of lending that uses by Islamic microfinanceproviders for financial and social inclusion to provide financial support for low-income people as well as theextremely poor. Through the in-bodied social inclusion tools, Islamic microfinance can best used to mitigate thenegative impact of the extreme poverty. Since financing micro-borrowers and extremely poor are highly risk, theneed for efficient and effective regulatory and supervision of microfinance frame work is very important. Thisresearch investigated Sudanese Islamic microfinance regulatory and supervisory framework. Despite of theexerted efforts by Sudanese government through providing favorable climate and the establishment of Islamicfinancial intuitions and establishing structured microfinance framework, the results showed that Sudanesemicrofinance regulatory framework is not providing best outreach. Despite the continuous increasing of theceiling portfolio by the regulatory authority until reached 12% from 4% since the first issued rules in 2006, theactually utilization is insignificant at the end of the year 2013. This might be due to several reasons such as badbasic infrastructures, ineffective follow up by the regulator of the microfinance providers, Islamic microfinancedeliberately ignoring the rural areas clients’ because of the high risk, the framework lack of the building capacitytools for clients as well as for the microfinance providers staff. The results of this research gives strong policyimplications for both to Islamic microfinance regulator and providers to carry on real revision and evaluation forthe efficiency and effectiveness of the current operated microfinance frame work in Sudan. These results mightbe useful for Islamic microfinance regulators and providers in Muslims countries and interested providers in theWest the benefit from the nullified factors that render the regulatory framework ineffective.

Towards Deeper Financial Integration in Europe: What the Banking Union Can Contribute

Abstract/Zusammenfassung The European Banking Union is a major step forward in fixing major deficiencies in the institutional framework of the Euro area. The absence of effective banking supervision and resolution powers at the European level promoted excessive private risk-taking in the up-run to the Euro crisis. Effective private risk sharing once risks materialized has been hampered. A properly designed Banking Union facilitates and improves private risk sharing, and it is thus a necessary institutional complement to a monetary union. Yet, the institutional framework of the Banking Union needs further strengthening in three regards. First, the supervisory framework needs to ensure uniform supervisory standards for all banks, including those located in non-Euro area countries. Also, conflicts of interest between monetary policy and banking supervision need to be mitigated. Second, bank resolution suffers from a highly complex governance structure. Restructuring and bail-in rules allow for a high degree ...

Optimal Supervisory Control of Discrete Event Systems: Cyclicity and Interleaving of Tasks

A substantial number of tasks in production systems are executed in a repetitive, cyclic fashion. Specifically, production systems run different production cycles of different products as well as different instances of the same production cycle. In this paper, we consider the optimal control and interleaving of such production cycles in a supervisory control framework for discrete event systems (DESs). That is, different from other approaches, our work is based on a behavioral specification of each production cycle. First, we adapt an optimal control approach for DESs, in order to optimize the operation of individual production cycles. Second, we employ the interleaving composition to design a supervisor that enables the simultaneous execution of different production cycles. Combining both results, we can further determine the maximum number of production cycles that can be executed simultaneously on a given production system.

Norway: Financial Sector Assessment Program-Technical Note-Oversight and Supervision of Financial Market Infrastructure, and Selected Issues in the Payment System

This Technical Note reviews the oversight and supervisory framework for systemically important Financial Market Infrastructure (FMI) in Norway. Norway has a modern and stable FMI. The assessment results suggest an effective supervision and oversight framework supported by a strong legal basis, adequate oversight resources, and good domestic and foreign cooperation between authorities. All Norwegian FMIs have completed assessments against the new international standards and are in the process of improving observance where needed. The authorities could consider strengthening their cooperation to address the risks from outsourced critical infrastructures and tighter interdependencies across FMIs. The authorities could also consider additional measures to strengthen the operational resiliency of payment systems.

The Single Supervisory Mechanism — Panacea or Quack Banking Regulation?

This paper analyses the new architecture for the prudential supervision of banks in the euro area. It is primarily concerned with the likely effectiveness of the Single Supervisory Mechanism (SSM) as a regime that intends to bolster financial stability in the steady state. By using insights from the political economy of bureaucracy it finds that the SSM is overly focused on sharp tools to discipline captured national supervisors and thus under-incentivises their top-level personnel to voluntarily contribute to rigid supervision. The success of the SSM in this regard will hinge on establishing a common supervisory culture that provides positive incentives for national supervisors. To this end, the internal decision-making structure of the European Central Bank (ECB) in supervisory matters provides some integrative elements. Yet, the complex procedures also impede swift decision making and do not adequately solve the problem. Ultimately, a careful design and animation of the ECB-defined supervisory framework and the development of inter-agency career opportunities will be critical. The ECB will become a de facto standard setter that competes with the European Banking Authority (EBA). A likely stand-off in the EBA’s Board of Supervisors will lead to a growing gap in regulatory integration between SSM participants and other EU Member States. Joining the SSM as a non-euro area Member State is unattractive because the current legal framework grants no voting rights in the ECB’s ultimate decision-making body. Nor does it supply a credible commitment opportunity for Member States that seek to bond to high-quality supervision.

A hybrid fault detection and isolation strategy for a team of cooperating unmanned vehicles

In this paper, a hybrid fault detection and isolation (FDI) methodology is developed for a team of cooperating unmanned vehicles. The proposed approach takes advantage of the cooperative nature of the team to detect and isolate relatively low-severity actuator faults that are otherwise not detectable and isolable by the vehicles themselves individually. The approach is hybrid and consists of both low-level (agent/team level) and high-level [discrete-event systems (DES) level] FDI modules. The high-level FDI module is formulated in the DES supervisory control framework, whereas the low-level FDI module invokes classical FDI techniques. By properly integrating the two FDI modules, a larger class of faults can be detected and isolated as compared to the existing techniques in the literature that rely on each level separately. Simulation results for a team of five unmanned aerial vehicles are also presented to demonstrate the effectiveness and capabilities of our proposed methodology.

La actual restructuración del sistema financiero de la Zona Euro

This document describes the three principal tasks of the European Banking Union, to understand better the measures of prudential regulation applied in the Eurozone since 2014. These new measures could be an example for the Latin American countries due to the rules applied and the new regulatory and supervisory framework implemented.

Basel III: Comrade or Contender for Islamic Banking Intuitions - A Case of Pakistan

Financial crisis of 2007 greatly impacted the global banking system. In the main time the rise of Islamic banking system comes as a substitute to the conventional banking system at the global level. Basel III accord come in being in 2011 put forward many regularity and supervisory frame work to establish the viability and credibility of world banking systems. The Islamic banking system increasing its presence in at the global level with assets of US$1.7 Trillion with annual growth rate of 17.6% up till the end of 2013. Five Islamic banking institutions are working in Pakistan as torch bearer. These five are pure Islamic banking companies in Pakistan not any of them is a subsidiary of the convention banks working in Pakistan. Researcher will look into five years business of these Islamic banking companies that how they react to the Basel III regulatory requirement and the role of central bank in Pakistan i.e. State Bank of Pakistan (SBP) in implementation of regulatory and statutory framework of Islamic banking system in Pakistan.Results of this studies reviles that the IBIs working in Pakistan are in better position in implementation of Basel III requirement like quality of capital, leverage ratio and risk management issues. We can consider it as the requirement of IBIs to work in this way as required by the shariah not by the Basel III regulation. IBIs need some indigenous system of regulation that suits to its need. Basel III not a suitable regulatory framework for the IBIs as it was framed for the conventional banking institutions.

A data envelopment analysis approach to evaluate sustainability in supply chain networks

Benefiting from a performance measurement system is an inevitable necessity for any supply chain management to direct the business operations towards the maximal efficiency. In particular, there has been an increasing interest in incorporating sustainability practices evaluation in supply chain operations in the last years due to various stakeholders' requirements. The sustainability paradigm calls for balancing economic, environmental, and social needs. This paper focuses on the evaluation of supply chain operations that maximize economic returns, minimize environment impacts, and meet social expectations. In order to design a supervisory framework to measure the performance of these operations, this study develops a multi-stage data envelopment analysis model that is apt to evaluate the sustainability of a chain of business partners. In addition, the proposed mathematical model is applied to two case studies; one in the manufacturing sector and the other in the banking sector.

Banking regulation and supervision: can it enhance stability in Europe?

Purpose – This paper aims to find the effects of regulatory and supervisory policies on bank risk-taking. The same regulation and supervision have different effects on bank risk-taking depending on influence factors. These factors were considered and a sample of the largest European banks from France, Germany, UK, Italy, Spain and Greece was used over the period 2005-2011. Design/methodology/approach – In this paper, the author analyses the effects of regulation and supervision on risk-taking. The author uses a sample of the biggest banks from six European countries (France, UK, Germany, Italy, Spain and Greece) over the period 2005-2011. Because the applicable entry of IFRS was in 2005, thus data of European banks are not available before this date. For each country in the sample, the 10 largest banks (defined by total assets) that lend money to firms were identified. The author does not include central banks or postal banks, which generally do not lend money to firms and are described as non-banking institutions (La Porta et al., 2002). Findings – It was found that restrictions on bank activities, supervisors’ power and capital adequacy decrease risk-taking. Thus, regulation and supervision enhance bank’s stability. While, deposit insurance increases the risk due to its association to moral hazard. Finally, it was found that strengthening regulatory and supervisory framework raises the risk-taking and weakens the stability of European banks. Originality/value – The author contributes to existing empirical analyses in three ways. First, the existing literature has drawn a lot of attention on US banks. However, the purpose of this paper is to examine the biggest banks of three European leaders (France, Germany and UK) and three more European countries influenced by the recent crisis (Spain, Italy and Greece) over the period 2005-2011. Second, most studies focus mainly on the relationship between regulation and profitability, yet seldom on the relationship between regulation, supervision and risk-taking. The author focuses on this relationship. Third, this study applies the two-step dynamic panel data approach suggested by Blundell and Bond (1998) and also uses dynamic panel generalized method of moments (GMM) method to address potential problems. The two-step GMM estimator that the author uses is generally the most efficient.

An integrated lookahead control-based adaptive supervisory framework for autonomic power system applications

Management of the power system infrastructure is a challenge due to its complex dynamics, size, deregulated operation, quality of service demands, and stability concerns. Autonomic computing has recently gained interest on power systems arena for self-healing, self-configuration, self-optimization, and self-protection schemes. Robustness and reliability of the power system can be enhanced with appropriate autonomic control action following the disturbances. Predictive optimal tuning of real time control parameters from the finite set of control actions is considered in this paper to prevent from impending system deterioration. We present the formulation of a generic, higher layer model-based Limited Lookahead Control (LLC) approach that can be applied to a variety of power system applications. The system model, including the lower level controller, load dynamics, and a network assists the controller action. Discrete time control decisions are made based on the optimization of the predicted response to a limited horizon from the developed model. Heuristics based A* algorithm is integrated into the framework to reduce the control overhead for real-time operation. Finally, we present a case studies on Matlab, and RTDS® to demonstrate the applicability of the proposed framework. A nine bus multi-machine power system benchmark is considered for voltage control application with the finite set of capacitor tuning.

A proposal for an open-source financial risk model

Purpose – The purpose of this paper is to present a policy proposal for building a new framework for gathering, measuring and disclosing financial risk information in the global economy. Design/methodology/approach – The paper examines the current state of the financial risk framework, notes its advantages and disadvantages and proposes a new construct that aims to address some of the shortcomings that are currently in place. The goals of a robust financial risk model are examined to determine the design of the proposed risk framework. Findings – The proposed open-source financial risk model separates the dual function that internal risk models perform within financial institutions, first to attempt to optimize the risk–return profile of mostly private economic rent-seeking entities, and second to maximize safety and soundness considerations for the public which is at risk of bearing the consequences of financial actors. Practical implications – The model allows widespread use of robust financial risk models. Social implications – The model enables a more transparent and democratic process for risk management. Originality/value – The study proposes a new global supervisory framework. Practical implications – The model allows widespread use of robust financial risk models. Social implications – The model enables a more transparent and democratic process for risk management. Originality/value – The study proposes a new global supervisory framework.

Swarna Jayanti Shahari Rozgar Yojana: Well Intended Poorly Executed

Swarna Jayanti Shahari Rozgar Yojana (SJSRY) was introduced by the Indian Government in 1997-98 as an initiative to create self-employment opportunities to alleviate urban poverty. Under this scheme the Central and the State governments share the financial responsibility in the ratio of 75:25 for providing subsidised loans to the self-help groups (SHGs) promoted by local government bodies in urban areas. Various studies conducted on this scheme all over India indicate that due to various lacunae in the implementation of the scheme it has failed to achieve the objective of poverty alleviation through self-employment generation. This study is based on a random sample of SHGs from below poverty line households in Thane city for the implementation of SJSRY. The study shows that SJSRY has not achieved the desired results due to poor implementation. While greater emphasis was laid on the delivery of financial assistance, other vital linkages and support mechanism did not get the desired attention. The scheme can do well if an ecosystem is created by establishing institutional linkages for training, marketing and technical support for the SHGs combined with a fool proof supervisory framework to monitor the scheme.

Interest Rates and Deposit Money Banks' Profitability Nexus : The Nigerian Experience

This study examined how interest rates affect the profitability of deposit money banks in Nigeria. The study was based on country aggregate level annual data that covered a period of thirteen years 1999 to 2012 and made use of multivariate regression analysis under an econometric framework. The Augmented Dickey and Fuller unit root test results indicate that the series are either I(0), I(1) or I(2) stationary. The estimated results show that Maximum lending rate, Real Interest rate and Savings deposit rate have negative and significant effects on the profitability of Nigerian deposit money banks as measured by return on assets at the 5% level of significance. Also, the study found that Real interest rate at the 8% level of significance has negative and significant relationship with Return on Equity of money deposit banks in Nigeria. On the other hand, the study found no significant relationship between interest rate variables and Net Interest Margin of Deposit Money Banks in Nigeria. The implication of the findings of this study suggests that the profitability of the banking sector is a function of changing interest rates. The study therefore recommends that government should adopt monetary policies that will help Nigerian deposit money banks to improve on their profitability and there is need to review and strengthen bank lending rate policies through effective and efficient regulation and supervisory framework. Banks can improve their profitability through charging moderate lending rates as against maximum rates as their circumstances may allow. Furthermore, the managers of money deposit banks are expected to create the conditions for an efficient banking system devoid of information asymmetry to adapt to changing macroeconomic variables of interest rates and inflation. Banks’ management must efficiently manage their portfolios in order to protect the long run interest of profit-making.

Challenges and Solutions to Islamic Banking System in a Pluralistic–Secular Country like Nigeria

The objective of this paper is to assess the challenges that the introduction of Islamic banking in Nigeria may face. It is also aimed at providing solutions to these challenges. In doing this, the study resolves that the challenges that may confront Islamic banking in Nigeria are institutional challenges such as inappropriate institutional framework, inadequate legal framework, lack of equity institutions, poor supervisory framework, disparity in accounting standard, lack of secondary financial markets and lack of short-term financial instruments and institutions. The operational challenges in the form of religious and cultural differences, lack of innovations in financial products, lack of profit sharing finance, shari’ah related issues, inadequate manpower with the requisite knowledge, lack of awareness and competition. In the presence of these hurdles, the study concludes that the proposed Islamic banking in Nigeria should take the bull by the horns in order to overcome these challenges. DOI: 10.5901/mjss.2014.v5n6p25

Measuring and explaining implicit risk sharing in defined benefit pension funds

This article investigates responses to changes in solvency by occupational pension funds using a unique panel data set containing the balance sheets of all registered pension funds in the Netherlands over a period of 13 years (1993–2005). A fixed discount rate for liabilities in the supervisory framework allows us to measure the response of pension funds to solvency shocks. We find that pension rights are expanded, by e.g. indexation, or limited, by for instance setting the pension premium over its actuarially fair price, in line with the funding ratio but that the pension funds’ response function exhibits two sharp and significant behavioural breaks, close to the minimum funding ratio of 105% and the target ratio of around 125%. We further find that large funds and grey funds are relatively generous to current participants.

“Sandtray Supervision”: Integrating Supervision Models and Sandtray Therapy

Supervision is an extremely important component of the counselor education process, and “Sandtray Supervision” has been developed as a creative supervisory tool. In addition, a conceptual overview of sandtray therapy and the current research involving its use within the supervision process is provided. Bernard’s (1979) Discrimination Model is reviewed as an example of a supervisory framework that can be integrated with sandtray therapy in the supervision process. The implementation of Sandtray Supervision and a case example of this creative approach are discussed. Finally, experiences of utilizing this creative approach and implications for future research are reviewed.

Impact of regulation and supervision on European banks’ stability

This article applies the Generalized Method of Moments technique for dynamic panels, using bank-level data for the selected European countries over the period 2005 to 2011, to investigate the impact of regulation and supervision on risk taking. Three conclusions are reached. First, in France, Germany and UK, restriction on bank activities boosts banking stability. However, supervisors’ power and capital adequacy encourage risk taking. Second, in Italy, Greece and Spain, we find that with more supervisors’ power, largest banks tend to take greater risks and strengthening regulation and supervision weakens the bank’s stability. However, the capital requirements decrease the risk taking. Third, strengthening regulatory and supervisory framework, and compliance with Basel principles enhance financial stability in Europe. These different results between European countries show that the application of regulation and supervision depends on the monitoring mode and the rhythm of application of regulatory policies