System Of Banking Supervision Research Articles

Japanese financial elites and banking supervision: the Ministry of Finance and the Bank of Japan

ABSTRACT Japan experienced a bubble economy in the late 1980s and a financial crisis in the 1990s, and the banking supervision system was criticized for failing to prevent excessive risk-taking behavior among commercial banks. In this study, I examine whether, and if so why, the banking supervision system deteriorated over the period in question, focusing on human capital, especially among the elites, in relation to banking supervision in Japan. I focus on two elements of banking supervision: the transition of supervisory policy and the characteristics (e.g. education, career path) of the heads of supervisory departments. The 49 Directors of the Financial Inspection Department in the MOF from 1927 to 1998 and the 26 Directors-General of the Bank Examination Department in the BOJ from 1928 to 1981 are analyzed. I also analyze the performance of several regional banks that appointed an ex-Director of the MOF as their president to check whether such an intimate bank – supervisor relationship worsened those banks’ management. The results showed no evidence of bad management as a result of that relationship. Rather, an increased burden on examiners and a reduced awareness of the importance of risk management led to the reduced effectiveness of banking supervision.

Judicial Protection for Natural Persons Sanctioned under the Single Supervisory Mechanism: Stuck in between Jurisdictions?

This paper analyses the system of judicial protection for natural persons that are sanctioned under the system of banking supervision provided by the Single Supervisory Mechanism (SSM). As the imposition of sanctions on natural persons gains traction to ensure regulatory compliance, this study scrutinizes whether natural persons can effectively access judicial protection when sanctioned by national competent authorities (NCAs) on the request of the European Central Bank (ECB). The paper unveils the complexities of the SSM's sanctioning system. While the ECB exercises direct prudential supervision on significant banks (SIs), allowing it to ascertain whether a bank violated relevant Union law and subsequently impose administrative pecuniary penalties to the bank (SI-decision), it lacks the competence to directly impose an administrative penalty on the natural persons responsible. Instead, the ECB may require the NCAs (ECB-request) to impose appropriate penalties on the responsible natural person. Within this intricate system involving EU and national administrative procedures, the natural persons may get stuck between jurisdictions. Facts and legal questions relevant to the SI-decision adopted by the ECB in relation to the alleged breach of law conducted by the SI, subject to challenge before the EU Courts, can significantly impact the (national) sanction imposed on the natural persons. After all, they are sanctioned for that very same breach. In order to gain a complete picture of the possibilities for natural persons to gain judicial protection in this complex reality, the paper analyses the possibilities for the natural persons to gain judicial protection with respect to the sanction imposed by the NCA, the ECB-request, and the SI-decision.

The Legal Nature of Behavioral Supervision of the Central Bank of the Russian Federation.

The subject of this study is the norms of Russian financial legislation and scientific sources containing information that allows to determine the legal nature (legal essence) of the Bank of Russia's activities on supervision of the behavior of participants in the financial market of the Russian Federation. The object of the study is the social relations that arise during the implementation of banking supervision and behavioral supervision of the Central Bank of the Russian Federation. The author examines in detail the concept of the legal nature of behavioral supervision of the Central Bank of the Russian Federation, establishes an analogy with the legal nature of banking supervision, and also analyzes the control and supervisory state activities. Particular attention is paid to the concepts of the phenomenon under study that have developed in science during the period of supervision by the Central Bank of the Russian Federation. The main conclusions of the study are generalizations of the prevailing views on the legal nature of behavioral supervision of the Central Bank of the Russian Federation. The novelty of the research lies in the fact that the author is one of the few attempts to define the concept of behavioral supervision, its subject and object. Additionally, he draws attention to the fact that the current model of supervision over the behavior of financial market entities is not as formalized as the system of banking supervision, due to the objective impossibility of regulating dynamically developing relations. At the same time, it is determined that the characteristic features of behavioral supervision are the subject composition, which is characterized by the participation of the consumer of financial services, in this regard, it is concluded that behavioral supervision is the supervision of compliance with the rights of consumers of financial services, but at the same time attention is drawn to the fact that behavioral supervision can act as a continuation of banking supervision. The author notes that this classification directly depends on the purpose of supervisory measures, for example, checking a credit institution or considering a complaint from a consumer of financial services.

Adaptation of banks' services in Ukraine to EU requirements

Problem setting. A properly functioning banking system that facilitates the provision of modern banking services, which is ensured by effective national legislation and its harmonization with EU law, can be considered a necessary prerequisite for the economic stability of any modern state. However, the effectiveness of legal regulation cannot be achieved without a clear understanding of the essence of the object of regulation and the instruments of influence on it, the place of banking regulation in the reforming and post-war restored economy of Ukraine, including in the conditions of modern regulatory mechanisms, such as Industry 4.0. Analysis of recent researches and publications. In recent years, the problems of legal regulation of banking operations have been dealt with by scientists from various fields of science and law, which corresponded to the current challenges of the time of conducting research. During the formation of banking law and legislation in Ukraine, the concepts of banking services and operations were mostly provided by Ukrainian scientists, in particular such as I. A. Bezkluby, O. O. Kachan, I. L. Nurzad, O. P. Orlyuk, most often on on the basis of a functional and substantive analysis or on formally legal grounds of the legislative definition of banking activity. Zh. O. Andriichenko, I. M. Chmutova drew attention to the development of the banking supervision system for banking operations based on a risk-oriented approach, the reliability of Ukrainian banks and their ability to resist the risks of money laundering. Bank payment services to be investigated by V.P. Bohun, I. M. Zhukov, S. M. Polovko, defining their content and tasks for improvement. At the same time, in the presence of separate legal concepts of financial services markets, including banking services, directly banking operations and types of banking activity, it becomes necessary to harmonize the legislative regulation of banking activity with the existing mechanisms of state regulation of the economy of Ukraine. Target of the research. In connection with the noted problems, in order to answer the question of the formation of directions for the legal regulation of banking activity and, at the same time, the state policy regarding the transition of the economy to Industry 4.0, the proper performance of the functions of financial intermediation of banks, it is necessary to determine possible tasks for the harmonization of further regulation of banking activity, the provision of financial services with mechanisms for restructuring the functioning of the economy of Ukraine in the conditions of Industry 4.0, as well as to note the trends of approximation of the regulation of banking operations to the requirements of the business environment, taking into account the interests of banks or their clients. Article’s main body. The actual dualism of the regulation of banking activity in Poland performs at least two functions: first, it defines the list of types of purely banking activity, and secondly, it clearly defines that these types of activities constitute the special competence of banks. Similar operations in the Law of Ukraine "On Financial Services", as well as in the Association Agreement between Ukraine, on the one hand, and the European Union, the European Atomic Energy Community and their member states, on the other hand, dated September 6, 2014, and in the Appendix regarding financial services to the General Agreement on Trade in Services (the Protocol on the Accession of Ukraine to the World Trade Organization, ratified by the Law of Ukraine "On the Ratification of the Protocol on the Accession of Ukraine to the World Trade Organization" dated 04/10/2008 No. 250-VI are classified as financial services and have in these normative acts, the substantive identity of the terms given in Directive No. 2013/36/EU for types of financial services, which are worded differently from the terms of these transactions in the Law of Ukraine "On Banks". Conclusions and prospects for the development. It is necessary to deviate from the definition of normative regulation of banking activity: either to remain on the basis of stable normative regulation or to regulate banking activity taking into account modern world trends regarding banking activity and financial services and as markets that contribute to the economic growth of the country. Therefore, there is currently a question regarding the improvement of approaches in accordance with which it is necessary to determine the ratio of modern means of legal regulation of banking activity, their justification and mandatory introduction into the economic and legal mechanisms of Industry 4.0.

The single supervisory mechanism and the European framework for the enforcement of competition law: a comparison between two models for economic governance in the EU

This paper proposes to develop a parallel reading of the banking supervision system and the framework for the enforcement of competition law, with the purpose of setting out points of convergence and divergence between the two, analyzing their institutional architecture and various issues pertaining to the relevant, applicable law. This approach might prove fruitful for a better understanding of each of the two systems, and for filling the gaps left open and unresolved by legislative texts. It might also offer some contribution in view of a more general analysis of the key-issues that those who design the systems meant to govern the European economy should consider.

THE SINGLE SUPERVISORY MECHANISM AND THE EUROPEAN FRAMEWORK FOR THE ENFORCEMENT OF COMPETITION LAW: A COMPARISON BETWEEN TWO MODELS FOR ECONOMIC GOVERNANCE IN THE EU.

This paper proposes to develop a parallel reading of the banking supervision system and the framework for the enforcement of competition law, with the purpose of setting out points of convergence and divergence between the two, analyzing their institutional architecture and various issues pertaining to the relevant, applicable law. This approach might prove fruitful for a better understanding of each of the two systems, and for filling the gaps left open and unresolved by legislative texts. It might also offer some contribution in view of a more general analysis of the key-issues that those who design the systems meant to govern the European economy should consider.

Stanovlenie denezhnogo obrashcheniya v Rossii: vnedrenie metallicheskoj sistemy i bankovskogo nadzora

The authors show the historical transition from the use of local money, in fact, reflecting the commodity turnover to an instrument of an emissive nature. The article describes the historical transition from bimetallism to the paper and bill of exchange forms of money circulation. it is shown that the money supply after the 1840s became a source of formation of credit funds, which ensured the need for the emergence of a system of banking supervision.

Економічні нормативи НБУ як інструмент регулювання банківської діяльності

Researching the problems of banking supervision in the course of the policy of cleaning the banking system of Ukraine is of particular importance. The issues of efficiency of regulation of the activities of commercial banks with the help of economic standards of the NBU remain topical. The article is aimed at a theoretical-methodical substantiation of the NBU economic standards system and identifying the peculiarities of their application as instruments for regulating the banking activities. The state of compliance with capital, liquidity and credit risk standards by commercial banks of Ukraine is examined. A correlation and regression analysis of the impact of credit risk standards on the volumes of overdue credit arrears of banks is carried out. Ways to improve the system of regulation of the activities of commercial banks based on the principles developed by the Basel Committee on Banking Supervision are proposed. A further proposal is made as to introducing an additional economic standard for the regulation of credit risks, which would assess the risks of repayment of loans. In addition, it will be expedient for Ukraine to build a conceptual banking supervision, which will ensure close interaction of components in order to improve the efficiency of banking institutions. A comprehensive system of banking supervision should diagnose the level of risks and implement systems of their management at the level of each separate banking institution.

A Study of Banking Supervision System in Modern China: Based on the Relationship of Government and Bank Guild

Finance is the core of the entire economy and plays a vital role in the smooth operation of the economy. Therefore, this paper attempts to start from the regulatory agencies, regulatory laws and regulations to reveal why modern Chinese banks chose to take bank self-control and industrial organizations as the main starting points of risk prevention. Through the analysis of the changes of modern banking supervision system, this paper sorts out and summarizes the experience of risk prevention and control of modern banks, so as to provide a mirror for the current financial risk prevention. The study finds that, since the establishment of China Merchants Bank, although the supervision system has gone through a process from start-up to continuous supplementation, its supervision effect was relatively limited. In terms of supervision agencies, from the branch of the late Qing Dynasty to the Ministry of Finance of the Beiyang Government, then to the Financial Supervision Bureau and the Central Bank of the Nanjing National Government, the professionalization and refinement of supervision has experienced great progress. However, subject to the government’s guidance, its risk prevention and control objectives were greatly affected by the government’s will, and the supervision effect was difficult to guarantee. In terms of supervision laws, the overall legal system was gradually improved, but due to poor coercive power, the supervision effect was poor. Due to the unsatisfactory supervision system, commercial banks not only strengthened their own risk management construction, but also strengthened the construction of Bank Guild to deal with internal and external risks. With the establishment and strengthening of Bank Guild, it played an important role in supervision and management under the early weak government supervision system in modern China, and even led the supervision of the entire banking industry from the outside, and promoted the progress of government supervision. After the establishment of the Nanjing National Government, due to the officialization of banks, the government’s supervision of the banking industry continued to be strengthened. The entire supervisory system was gradually incorporated into the government’s leadership, and the supervisory role of Bank Guild was gradually weakened.The contribution of this paper is mainly reflected in two aspects: Firstly, based on the relationship of government and Bank Guild, this paper explores the changes in the banking supervision system in modern China, and the relationship between government supervision and Bank Guild, sorting out the characteristics of the changes in the banking supervision system, as well as filling in the blank of relevant banking supervision system research. Secondly, we should learn from the past and learn from the experience and lessons in the changes of modern supervision system. The first is to clarify the supervisory body and maintain independent supervision; the second is to refine the system and strengthen the mandatory binding force; the third is to maintain the independence of the banking self-regulatory organization.

ДЕТЕРМІНАНТИ КОНКУРЕНТОСПРОМОЖНОСТІ БАНКІВСЬКОГО СЕКТОРУ ПОЛЬЩІ ТА УКРАЇНИ

Анотація. Присвячено дослідженню детермінант конкурентоспроможності банківського сектору національної економіки на основі порівняльного аналізу функціонування банківських систем України і Польщі. Проведено дослідження, використовуючи таку методику: порівняльний аналіз інституціональної ефективності банківського сектору України і Польщі; порівняльний аналіз рівня концентрації банківського сектору України і Польщі; порівняльний аналіз мікроекономічної та макроекономічної ефективності банківського сектору України і Польщі; порівняльний аналіз соціальної ефективності банківських секторів обох країн щодо їхньої фінансової інклюзії. Результати дослідження засвідчили вищий рівень конкурентоспроможності польської банківської системи, що відображається у її стабільному функціонуванні протягом тривалого періоду часу, стійкості до криз і надмірних ризиків, ефективній системі пруденційного нагляду, розвиненій інституційній структурі, близькій до потреб ринку, а також динамічному зростанні банківського фінансування національної економіки та доступності банківських послуг для бізнесу і домогосподарств. На відміну від польської банківської системи, українська банківська система в останні роки пережила глибоку кризу і значну кількість банкрутств банків, високу частку непрацюючих кредитів, проблеми з ліквідністю тощо, а тому з метою її порятунку значної концентрації державного капіталу в банківській системі, високих процентних ставок і як наслідок значного зменшення частки банківського фінансування національної економіки і наявність значних бар’єрів для доступності банківських продуктів для споживачів. Визначено, що ключовими детермінантами конкурентоспроможності національного банківського сектору є такі: наявність розвиненої інституційної структури банківської системи; запобігання монополізації та надмірній концентрації банківського сектору; наявність ефективно функціонуючої національної системи банківського нагляду і регулювання; формування державної стратегії розвитку банківського сектору на засадах ключового гравця національної фінансової екосистеми і забезпечення виконання банківською системою її основних функцій в економіці та суспільстві. Ключові слова: банківський сектор, банківська система, конкурентоспроможність, інституційна структура, концентрація, фінансова стабільність, макроекономічна та мікроекономічна ефективність, соціальна ефективність, фінансова інклюзія. Формул: 0; рис.: 10; табл.: 0; бібл.: 27.

Modern system of banking supervision in Russia and directions of its improvement

Modern system of banking supervision in Russia and directions of its improvement

ТЕОРЕТИЧНІ I ПРАКТИЧНІ АСПЕКТИ ІНСТИТУЦІЙНОГО РОЗВИТКУ БАНКІВСЬКОГО РЕГУЛЮВАННЯ I НАГЛЯДУ

Розглянуто інституційний розвиток банківського регулювання і нагляду в Україні з урахуванням прогресивного вітчизняного і міжнародного досвіду. Розкрито теоретичні та практичні аспекти інституційного розвитку банківського регулювання і нагляду, проаналізовано ефективність системи нагляду і регулювання за банками в контексті впровадження в Україні нової інституційної системи банківського нагляду, яка б забезпечувала чіткий та ефективний нагляд щодо захист прав споживачів і поведінки учасників фінансового ринку. Запропоновано нову інституційну систему нагляду, яка має включати чіткий та ефективний нагляд щодо захисту прав споживачів і поведінки учасників фінансового ринку. Запропоновано паралельно зі створенням мегарегулятора на базі НБУ створити незалежний інститут щодо захисту прав споживачів фінансових послуг, який буде охоплювати весь ринок і матиме виключну відповідальність у сфері нагляду за захистом прав споживачів та відігравати провідну роль в ініціативах у фінансової грамотності. Після створення нової інституційної системи нагляду обидві функції (пруденційна і нагляд за захистом споживачів) мають бути збалансованими і взаємодіяти для забезпечення ефективного функціонування наглядової системи.

Adjustment of prudential norms, determining vector of the banking sector development

Currently, the Bank of Russia carries out radical reforms in the administration system of banking supervision and regulation. You can observe the interaction between monetary policy and macro prudential policy. The purpose of the traditional regulator is protection of investors', shareholders', customers' capital. The main problem of the Russian economy is the shortage of investment and working capital from non-credit institutions and the difficulty to get a foothold lending. The main objective of the banking system reform is to create additional sources of investment for non-credit institutions. The tightening Supervisory requirements although eliminate the total bank risks, but reduce business activity and agility of the banking system. The curve of investment demand in the Russian economy is flat, that characterizes the low profitability of investments and the weak dependence on interest-rate policy. In this connection, it has been suggested to consider investment companies as the main criterion of competitiveness and the main argument in decision-making about granting a credit line.The feasibility of the allocation of investment criteria in the monetary rule has been shown in the article. The urgency proportional distribution of regulatory indicators of banking supervision by tier banking system, which are formed from the pacing of functional and regional specificity, – has been substantiated. The mechanism of price stability based on the clustering of financial institutions has been offered. It has been suggested to use the investment criteria as justification for a transfer service of non-bank organization to another bank cluster. Possible trends and implications of key planned reforms of the banking system including the bank's tier and the distribution tier of powers and functions have been analysed.Due to measures of preventive supervision and bank clustering, it is possible to expect regional market segmentation, improving the effectiveness of internal control systems, based on the distribution of the control functions in bank tiers, simplify management and risk reduction in accordance with the profile of the company and the level of the bank's operations. It has been proved in the paper that a focused segmentation of the credit market allows us to reduce the credit risks for banks, as well as to link market characteristics with the business models of each cluster.

THEORETICAL AND METHODOLOGICAL FOUNDATIONS OF MODERN BANKING SUPERVISION

The necessity of new, modern, adapted to the requirements of the economic realities theoretical and methodological bases of banking supervision implementation formation in Ukraine is justified by the author. The global and national trends in the functioning of the banking supervision system are investigated in the article. Some flaws and shortcomings in the action of international and national supervisory authorities are selected. The constructive proposals of the theoretical and methodological foundations of modern banking supervision in Ukraine are proposed.Key words: bank, banking, banking supervision, the National Bank of Ukraine, the Basel Committee of Banking Supervision.

Towards a Single Standard of Professional Secrecy for Supervisory Authorities – A Reform Proposal

Recent case law on the scope of professional secrecy for the supervisory authorities in the financial sector and on the measure of openness of their files highlights the lack of coordination among the silos of supervision and the absence of clear and uniform professional secrecy rules across the financial sector. The introduction of the Single Supervisory Mechanism (SSM) makes this situation more acute: notwithstanding a centralised system of banking supervision, different approaches may exist in respect of access to files, even when based on EU legislation. This contribution addresses the accountability of supervisory authorities and, notably the European Central Bank (ECB), from the perspective of access to supervisory files, as a prelude to possible follow-up proceedings for failing supervision. Recent judgments in the Altmann, Baumeister, Buccioni, and UBS Europe cases slowly move the case law on supervisory secrecy towards more openness, long after Hillegom/Hillenius (1984). The judgments lead us to wonder whether the absence of legislative coordination and questionable drafting is being remedied by the judiciary. The variety of legislative provisions and relevant recent case law form the backdrop of our proposal to adopt a Regulation on professional secrecy for supervisory authorities in the financial sector, which would institute a single standard that is directly applicable across Member States and supervisory authorities.

Developers' Competition Behaviour of Land Reserve in Assembled Buildings Development: Based on Game Analysis Framework

Based on the perspective of game theory, this paper studies the land reserve competition behaviour of developers in assembled buildings development. This paper studies in detail the land price decision in the unilateral equilibrium model of land market, the lending strategy of commercial bank executives under the banking supervision system, the bank credit demand of developers hoarding land, and the bilateral equilibrium model of credit-land market under the loan game of bank executives. The results show that the equilibrium price of land is positively correlated with the number of developers, the total amount of bank loans available to developers and the basic price of land. There is a positive "vicious" circular transmission mechanism between land price, marginal private interest of bank executives' lending and bank financial support.

Constitutional and Administrative Pluralism in the EU System of Banking Supervision

This Article examines the relationship between the developing European Union (EU) system of banking supervision and the theories of constitutional pluralism. It questions the remaining epistemic, explanatory, and normative value of these theories with regard to the EU system of banking supervision. The argument is broken down into three parts. First, the Article briefly describes the system of banking supervision in the European Union and the pluralist challenges that it spurs. Second, it schematically maps out the leading theories of constitutional pluralism to test, by way of their application to the field of EU banking supervision, their epistemic, explanatory, and normative value. Finally, to the extent that this value has diminished, the Article offers another pluralist theory, not a constitutional one, which could supplement the identified epistemic, explanatory, and normative gaps. This is a theory of administrative pluralism.

THE INSTITUTIONAL STRUCTURE OF PRUDENTIAL BANKING SUPERVISION SYSTEM: ACROSS THE WORLD REVIEW

The article is devoted to the research of prudential banking supervision, as one of the key factors for ensuring financial stability. The fundamentals of prudential risk-oriented banking supervision system’s organization in current circumstances are defined. Particular attention of this article is paid to the question of optimal institutional organization of prudential banking supervision system with an aim to ensure stability of banking system of the country. The practice of foreign counties in organization of prudential banking supervision system is considered.

New roles for auditors and reporting accountants in UK banking supervision under the Banking Act 1987

PurposeThe paper aims to offer an exploration of the Banking Act 1987 which was passed following the failure of Johnson Matthey Bankers (JMB) in 1984. This Act extended the role of auditors in banking supervision by removing traditional confidentiality constraints and created a new role of “reporting accountant”. The paper seeks to examine the origin and development of these new reporting roles. In addition, the paper considers the extent to which the findings of this historical investigation might contribute to current debates on the role of auditors in banking supervision.Design/methodology/approachThe paper draws on official documents, personal accounts of individuals responsible for dealing with the JMB crisis, and semi‐structured interviews conducted with audit partners and banking supervisors who had direct experience of implementing the supervisory reforms instituted under the Banking Act 1987. Power's explanatory schema of controversy, closure and credibility is adopted as a framework for the analysis of documentary sources and interview data.FindingsThe failure of JMB generated sufficient controversy so as to require reform of the system of banking supervision. The paper shows that JMB was a controversy since it disturbed what went before and carried with it sufficient allies for change. To achieve closure of the controversy, agreement by key actors about changes to the nature of the role of auditors was required to ensure legitimacy for the reforms. Backstage work undertaken by the auditing profession and the Bank of England provided the necessary credibility to renormalise practice around the new supervisory arrangements.Originality/valueThe paper develops Power's schema which is then employed to analyse the emergence of the new role of reporting accountant and extended role for auditors in UK banking supervision. The paper provides empirical evidence on the processes of controversy, closure and credibility that help to ensure the legitimacy of accounting and auditing change.

Banking supervision and the special resolution regime of the Banking Act 2009: the unfinished reform

One of the fundamental rationales underpinning banking regulation and justifying the costs it entails is the prevention of banking failures and associated depositor runs. This is exactly what the UK regulators could not prevent during the Northern Rock crisis. Apart from the much discussed regulatory failures, the Northern Rock crisis also exposed the absence of an effective legal system dealing with failing banks. The Banking Act 2009 introduces a number of important and far reaching reforms, including a Special Resolution Regime (SRR) for failing banks. The reforms address several of the identified regulatory loopholes. Thus, the Act constitutes a significant improvement over the previous regime. Yet the Act does not seek to reform banking supervision arrangements, even though these have become the subject of considerable criticism. This article argues that, in addition to other reasons, the effective operation of the SRR requires the reform of the institutional structures of the UK system of banking supervision. Otherwise the serious governance challenges and distributional issues the SRR creates may seriously undermine the standing of the SRR authorities, namely, the Treasury, the FSA, and the Bank of England, and have an adverse impact on the effectiveness of the new regime.