The New Financial Architecture: Banking Regulation in the 21st Century

The New Financial Architecture: Banking Regulation in the 21st Century

The New Financial Architecture: Banking Regulation in the 21st Century

The New Financial Architecture: Banking Regulation in the 21st Century

Synopsis

Dr. Gup and his panel of regulatory professionals and academics explore some of the hottest topics in what has been called the New Financial Architecture-a quest for new methods of bank regulation that can cope with dramatic changes occurring in the world's financial markets and institutions. They suggest solutions, probe the difficulties in implementing them, and in a surprising twist, show how some of the more newsmaking solutions may not work as well as some experts believe. An important resource for professionals throughout the banking and financial services industries, and their academic colleagues.

Excerpt

This is the third of a series of books that began with bank failures (Bank Failures in the Major Trading Countries of the World, Quorum Books, 1998) and banking crises (International Banking Crises, Quorum Books, 1999). Since 1980 more than 130 countries have experienced significant banking sector problems and crises. the large number of bank failures and crises reveals that no country, including the United States, is immune from such problems.

To some extent, the expansion of global banking and changes in financial and information technology contributed to the financial shocks in 1997 and 1998. Huge global banks and hedge funds trading in foreign exchange markets may have exacerbated the situation. BankAmerica, Citicorp, and Bankers Trust all had large trading losses in foreign exchange in 1998. Shortly thereafter, BankAmerica was acquired by Nations Bank, Citicorp and Traveler's merged, and Bankers Trust was acquired by Deutsche Bank (Germany).

Bank failures, crises, global banking, megamergers, and changes in technology are rendering the existing methods of prudential regulation (regulations for bank safety and soundness) weakened at best, ineffective at worst. Federal bank regulators, as well as bank regulators in other countries, are 4-aware of the problems. They are in the process of evaluating new and existing tools to cope with them. One of these tools is greater reliance on market discipline, another is the use of internal- controls-based statistical models such as Value-at-Risk, a third is subordinated debt. Beyond the tools for supervising individual banks, the . . .

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