Bank failures, crises, global banking, megamergers, changes in technology--the effect of these world events is to weaken existing methods of regulating bank safety and soundness, and even to make some methods ineffective. Federal regulators are evaluating new ways to solve them. Dr. Gup and his panel of academics and regulatory professionals explore these problems and the difficulties in implementing solutions. They point out that global banking, megamergers, and changes in technology are drastically altering the way financial services are delivered. They also argue that existing methods of bank regulation, formulated in the United States and elsewhere as early as the 19th century, are not able to cope with these changes. The search now underway for new methods that are global in scope. Inevitably, they will involve cross-border supervision and international cooperation.

Covering a wide range of topics, from the rationale of banking regulation to optimal banking regulation in the new world environments, this book examines the innovative tools needed to cope with these problems. Greater reliance on market discipline; the use of internal controls based on statistical models, such as Value-at-Risk; and subordinated debt are discussed. This timely, probing analysis of one of the hottest topics in bank regulation today, is an important resource for professionals and their academic colleagues in the fields of banking, finance, investment, and world trade.

To the layman who wishes to understand modern Islamic financial transactions, this book will prove friendly and helpful. It provides the underlying principles of Shariah financial instruments and presented them in actual and practical form. Since 1983, Malaysia has been making significant inroads into the Islamic financials landscape. Today Islamic financial transactions have made their presence felt in almost all financial institutions including banks, unit trusts, insurance, discount houses, fund management, factoring, pawn broking and project financing. And with more than USD200 billion Islamic funds available in global finance today, it is logical that the business of Islamic banking, insurance and fund management is fast expanding and encroaching into non-traditional financing. As the Holy Quran enjoins profit creation via trading and commercial transactions (al-bay') while forbidding profit earned from loans (riba), increasing Islamic consciousness among the Muslims today has opened up new business opportunities in Islamic finance, financial planning and wealth management. The Shariah not only condone interest as riba, but prohibits elements of gambling (maisir) in financial transactions. Ambiguities (gharar) in contractual agreements must be avoided at all cost while companies seeking Islamic capital must not engage with prohibited goods such as alcoholic beverages, pork and pornographic material. But current practices although unintentionally seem to out focus the real Quranic agenda for wealth creation and management. The Quranic alternative to riba is trade and commerce (al-bay'). The essence of trade and commerce is profit creation that implicates risk-taking (ghorm) and value-addition (kasb). Doing so promotes fairness and equitable transactions ('adl) and thus putting ethics and morality (akhlak) into the limelight of corporate business today. This book has attempted to venture into several issues of Islamic finance that incorporates the Quranic conception of trading and commerce (al-bay'). Profit created from financial instruments devoid of risk-taking (ghorm) and value addition (kasb) does not fit into the Quran's outlook of al-bay'. It critically examines current Islamic financial products offered by banks, mutual funds and insurance companies and help guide prospective customers to understand the underlying Shariah principles on which these products are structured. Products ranging from bank deposits/assets and capital market instruments are discussed based on prevailing practical experience in Malaysia as well as other Muslim countries. Divergent Shariah opinions on sale-buyback (bay' al-'inah) and debt trading (bay'al-dayn) are discussed with good intentions to harmonize global Islamic financial transactions. Of most significant is the push for equity financing (musyarakah/mudarabah) in the banking business with proper application of salam and istisna' contract as well. Widespread use of murabahah and al-bai-bithaman ajil (credit sale) contracts in Islamic finance is a worrying trend. This book tries to explore the place of Islamic financial contracts in modern financial markets, whether Islamic financial instruments actually reflect true label. Implication of trading (al-bay') is expected to invite venture capital application in Islamic banking and rationalizes universal banking model for Islamic banks. This book serves to guide banking customers, practitioners and investors over the range of Shariah products available in Malaysia's financial market and help impress how these products can impact their earnings and business.

The book describes the birth and growth of financial institutions and stock exchanges in Scandinavia and Finland from 1656 to 2010, including their banking crises and the history of banking regulation. It argues that quantitative regulations cannot, in the long run, produce the desired results and bear the seeds of future financial crises.

Paul J.J. Welfens and Holger C. Wolf While the economies of Asia and, more recently, South as well as North America have enjoyed sustained high growth, the growth performance of western Europe and in particular continental Europe has been rather modest. Coupled with sizable improvements in labor productivity and - at best - steady capital productivity, growth proved insufficient to sustain employment levels, much less to replicate the US job creation success. Relative inflation performance has been much better: in the run-up to European Monetary Union inflation rates have dramatically converged towards the lower end of the distribution while risk premia on formerly high inflation economies have fallen. Yet, looking forward, the undoubted success in achieving price stability is mitigated by the lackluster growth -and in particular employment -performance. Indeed, the relative little attention paid to initiatives directed at raising economic growth is startling, not only in the light of the US policy record but also in light of the remarkable rebound of those European economies which have aggressively tackled the structural problems, most prominently the UK and Ireland.

This book examines the reforms of banking in Eastern Europe, which are a key element of the transition to the market in those economies. Particular emphasis is placed on the "bad domestic bank debt" problem. The book also analyzes the development of capital markets in Eastern Europe, and their role in attracting foreign flows, with case-studies on the former Czechoslovakia, Hungary and Poland.;Contributions are from senior policy-makers and academics from Central and Eastern Europe who are involved in the reforms.

Building upon a wide range of literatures, this book argues that international regulatory institutions become stronger when oligopolistic institutional arrangements decay and competitive pressures intensify. This is shown to be the case for global finance by the study of two inter-state institutions - the Basle Committee on Banking Supervision and the International Organization of Securities Commissions, and of the international banking and securities industries which they seek to regulate. There is also the development of the concept of "private" regimes.

This text brings together a number of research studies, all of which examine the behaviour of foreign exchange rates. The main focus of the collection is on empirical characterization of high-frequency exchange rate data. The pioneering studies demonstrate and explain, amongst other things, the regular patterns in intra-day foreign exchange rate activity, the effects of macroeconomic news of rates and analyze the profitability of technical trading rules in these markets. The collection should be of use to students, academics and practitioners who are interested in exchange rate dynamics.

At the start of the twenty-first century, the Japanese financial system is undergoing a major transformation. This process is spurred by a sense of crisis. Dominated by large institutions, the Japanese banking system has suffered from serious problems with non-performing loans since the early 1990s, when the Japanese stock market and urban real estate market both crashed. Delays in responding to these twin asset bubbles, by both regulatory authorities and the banks themselves, made matters worse and led to a banking crisis in late 1997 and early 1998. Not anticipating this setback, in late 1996 the Japanese government inaugurated its Big Bang of comprehensive financial deregulation designed to complete the process of creating free, fair, and open financial markets'. Beginning in late 1998 and early 1999 the government finally embarked on a major rehabilitation of the Japanese banking system, including making available some Yen 60 trillion (approximately USD 500 billion) of government funds to recapitalize fifteen major banks, adequately fund the deposit insurance program, and write off the bad loans of nationalized or bankrupted banks. One result of this reform process is that the Ministry of Finance (MOF), which dominated Japanese financial system policy for most of the post-war period, has been stripped of most of its former regulatory powers. The purpose of this book is to describe, analyze, and evaluate the process that is transforming the Japanese financial system. The chapters address various issues relating to the transition of the Japanese financial system from a bank-centered and relationship-based system to a competitive market-based system. Questions taken up include: Why did Japanese banks get into such serious trouble? Why has the MOF lost its immense power? How will the Big Bang's financial deregulation further change the Japanese financial system, including the huge government financial institutions and postal savings system? What are some of the broader implications of this transition? The book is divided into three parts: Part I considers the origins of Japan's banking crisis; Part II focuses on five particularly important areas of major actual and potential changes; Part III addresses the effects of the Big Bang, including its potential systemic externalities. Taken together, this book offers an unusually up-to-date, comprehensive and thorough appraisal and evaluation of the profound changes occurring in Japan's financial system.

The Bundesbank is one of the world's most powerful and successful central banks, outstanding for its independence in the conduct of monetary policy and for its success in the achievement of relative price stability virtually throughout the post-war era. This collection of essays by the President of the Bundesbank, by former and present Board members and by Heads of Department within the Bundesbank offer a rare inside insight into its operations. The individual contributions to this volume explain the historical, legal and institutional basis of German internal and external monetary policy and highlight the goals of the German central bank and its role in the economy as a whole. The role of the Deutschmark as one of the leading international transaction, reserve and investment currencies is discussed in detail. Students of monetary management and the banking community throughout the world will benefit greatly from a study of this unique volume.

Banking is now an active asset-liability risk management enterprise, attributable in large part to the globalization of commerce. The authors of this descriptive yet practical, applications-oriented book examine the sources and management of traditional and nontraditional banking risks, then the conventional on-balance sheet and the modern off-balance sheet risk management methods. Unlike other more general risk management books, however, they focus closely on the use of financial derivatives--instruments to control the core risks attributable to credit and to fluctuations in interest and foreign exchange rates. The authors cover all this and more, giving experienced and novice practitioners both an easily accessed way to understand and cope with the banking risks they are already familiar with, and the new risks just emerging. The book will also be useful as a supplemental text in college-level courses on money and banking and on the operation of financial markets in general.

The authors begin by explaining how banking has moved from a routine financial process to an active and impersonal process of risk management, from relationship banking to community banking. Even banks that have stayed with traditional lending are now assuming greater risks. The authors then focus on the details of measuring, monitoring, and controlling risks. They define risk and the different philosophical approaches to its management, then continue with a discussion of operational matters, such as risk identification and classification. They discuss the evolution of banking risk management and the banking environment of the 20th Century, with special attention to the differences in methods used during the time of fragmented and highly regulated economies and those used in the highly integrated global economies of the last quarter century. The book describes in useful detail the major financial derivative products: forwards, options, caps, collars, and swaps, and their uses as risk management devices and tools for speculation, both. The book also treats on-balance sheet risk management methods, such as credit options and credit swaps. Interest rate risk is also covered in detail, and so too the management of foreign currency risk.

This book provides new interdisciplinary and comparative answers as to why banking sectors in 'liberal' and 'coordinated' market economies operated under a shared set of rules during the Global Financial Crisis. Exploring the role of complex interactions among interdependent structures, institutions and agents defines this banking behaviour.

This book summarizes Chinese banks' achievements in global markets and examines the differences between Chinese and foreign banks. It also explores the future roadmap of internationalization and the risks involved in the process, in order to provide reference resource for Chinese banks. Based on the CBII (Chinese Bank Internationalization Index), which was first released in 2015, the book introduces the Banks' Internationalization Index ("BII") and expands the BII by examining two groups of data, including the number of overseas branches, overseas assets and revenue. In addition it analyzes representative Chinese banks' internationalization, using 16 of the Global Systemically Important Banks (G-SIBs) as benchmarks.

This book offers a comprehensive guide to the modelling of operational risk using possibility theory. It provides a set of methods for measuring operational risks under a certain degree of vagueness and impreciseness, as encountered in real-life data. It shows how possibility theory and indeterminate uncertainty-encompassing degrees of belief can be applied in analysing the risk function, and describes the parametric g-and-h distribution associated with extreme value theory as an interesting candidate in this regard. The book offers a complete assessment of fuzzy methods for determining both value at risk (VaR) and subjective value at risk (SVaR), together with a stability estimation of VaR and SVaR. Based on the simulation studies and case studies reported on here, the possibilistic quantification of risk performs consistently better than the probabilistic model. Risk is evaluated by integrating two fuzzy techniques: the fuzzy analytic hierarchy process and the fuzzy extension of techniques for order preference by similarity to the ideal solution. Because of its specialized content, it is primarily intended for postgraduates and researchers with a basic knowledge of algebra and calculus, and can be used as reference guide for research-level courses on fuzzy sets, possibility theory and mathematical finance. The book also offers a useful source of information for banking and finance professionals investigating different risk-related aspects.

The financial crisis has exposed severe shortcomings in mainstream monetary economics and modern finance. It is surprising that these shortcomings have not led to a wider debate about the need to overhaul these theories. Instead, mainstream economists have closed ranks to defend existing theories and public authorities have expanded their interference in markets. This book investigates the problems associated with mainstream monetary economics and finance, and proposes alternatives based on the Austrian school of economics. This school emanated from the work of the nineteenth-century Austrian economist Carl Menger and was developed further by Eugen von Boehm-Bawerk, Ludwig von Mises, and Friedrich August von Hayek. In monetary economics, the Austrian school regards the creation of money by banks through credit extension as a key source of economic instability. From this follows the need for a comprehensive reform of our present monetary system. In a new monetary order, money could be issued by both public and private institutions, and there would be no need for fractional reserve banking. Instead of creating money, banks would intermediate it. In finance, the Austrian school rejects the notion of rational expectations and measurable risk. Individuals use their subjective knowledge to gather and evaluate information, and they act in a world of radical uncertainty. Hence, markets are not "efficient" nor can portfolios be built on the basis of known probability distributions of asset prices as described in the modern finance literature. This book explores the need for a new theoretical foundation for asset pricing and investment management that will give practitioners more useful orientation.

This book contains original readings on Reserves Management for central banks and sovereign wealth funds. It aims to outline best practice in respect of strategic asset allocation, facilitating knowledge-sharing across organizations and encouraging collaboration and dialogue between reserves and asset management specialists in the organizations.

Creating sustainable shareholder value is one of the main strategic objectives for financial institutions. This text provides a detailed analytical assessment of shareholder value creation. The first part provides a framework for analysing shareholder value theory by discussing how shareholder value can be defined, if it can be considered a valid strategic objective for banks, and how it can be measured and created. The second part presents various empirical investigations in to order to measure shareholder value and some of its drivers. The final part analyses the importance of these drivers in creating shareholder value and develops a new measure of bank efficiency.

Over the last fifty years, increasingly sophisticated risk measurement and management techniques have revolutionized the field of finance. More recently, the globalization of financial markets and policy changes in the regulation of financial institutions have impacted upon how commercial banks manage risk. The widespread implications of these fundamental changes prompted an international conference held in May, 1997, devoted to the topic of risk management and regulation in banking. This book contains the formal papers and the panel discussions that comprise the conference proceedings, and thus collects some of the latest research on managing financial market risk by top scholars, policymakers, and high-ranking banking officials from around the world.

The papers in this volume were presented at three invited sessions at the annual meetings of the Western Economic Association in San Diego, California on July 8-10, 1999. The comments by delegates were also presented at that time and are included in the volume.

The theme of the sessions was "Bank Problems: A Global Perspective." As has been well documented in previous volumes in this series, serious banking problems have plagued the large majority of countries globally be they industrial, emerging or transition economies. The problems arose because of both market failures and regulatory or government policy failures. The costs of these problems in terms of reduction in real output, misallocations of both real and financial resources, and transfer payments and cross-subsidies, particularly from taxpayers to protected stakeholders in failed banks, have been large and burdensome. Thus, a better understanding of the causes of the problems in both the private and government sectors and their potential solutions is a prerequisite for avoiding, or at least minimizing repetitions in the future. The papers in this volume contribute to this effort and add to our storehouse of knowledge. The emphasis on global in the title is reinforced by including papers by authors from Italy, Spain, and the United Kingdom, as well as the United States.

As financial markets are liberalized, bank management and bank regulators and supervisors are faced with new and complex challenges. In general, bank management is faced with the challenge of managing in a competitive and volatile market environment; bank supervisors have the challenge of establishing the framework that permits risk-taking without endangering the banks' safety and soundness. The book identifies and discusses a set of specific challenges, and suggests approaches that may be used by management and supervisors to surmount them.

Financial crises have plagued economies around the globe for centuries, yet no satisfactory policy solution has been found to significantly reduce the likelihood and severity of these devastating events. Macroprudential policy, the intellectual response to
financial crisis, may provide the solution to this recurrent problem. However, what this means in practice is subject to disagreement - with radicals proposing measures to stablise the flow of credit to households and companies, and others suggesting a more conservative approach focused on the banks. Macroprudential Policy is the first book to provide a coherent and comprehensive coverage of the issues of why, when and how policymakers should intervene.
Barwell brings his considerable experience of working in both a cenral bank and the financial sector to bear in examining the practical justification for the new regime, the institutions of macroprudential policy, the instruments at policymakers' disposal, and a discussion of how policymakers will go about discharging their responsibilities. The book also reviews the economic foundations of macroprudential policy. Conventional macroeconomics is based on assumptions that may work for the analysis of price stability and the conduct of monetary policy, but which more or less rules out the possibility of financial crises. This book introduces an alternative macroeconomics where crises can flourish, identifying the market failures which justify interventions to stabilize the system.

The purpose of this book is to examine the significant and increasing problem of state bank non-performing loans (NPLs) in China, which have undermined the stability of the banking system and the efficient operation of markets. The accumulation of NPLs in China has been caused by the dominant role of State banks in China's financial markets, weak internal controls within State banks, policy loans to state owned enterprises, unnecessary administrative controls on banks' lending activities, and inappropriate banking regulation and supervision. The author draws on experiences at national, regional and international level to make recommendations for the development of better workout procedures for existing NPLs. He also examines the role of banking regulation and supervision in preventing accumulation of NPLs and in avoiding the impact of NPLs on the stability of the banking system and the conditions of market discipline.

Over the last ten years mobile payment systems have revolutionised banking in some countries in Africa. In Kenya the introduction of M-Pesa, a new financial services model, has transformed the banking and financial services industry. Giving the unbanked majority access to the financial services market it has attracted over 18 million subscribers which is remarkable given that fewer than 4 million people in Kenya have bank accounts. This book addresses the legal and regulatory issues arising out of the introduction of M-Pesa in Kenya and its drive towards financial inclusion. It considers the interaction between regulation and technological innovation with a particular focus on the regulatory tools, institutional arrangements and government decisional processes through the examination as a whole of its regulatory capacity. This is done with a view to understanding the regulatory capacity of Kenya in addressing the vulnerabilities presented by technological innovation in the financial industry for consumers after financial inclusion. It also examines the way that mobile payments have been regulated by criticising the piecemeal approach that the Central Bank of Kenya has taken in addressing the legal and regulatory issues presented by mobile payments. The book argues there are significant gaps in the regulatory regime of mobile banking in Kenya.

In this volume the authors provide a survey and an examination of the roots of Swiss banking in order to explain the phenomenal success of Switzerland's banks. Contrary to the conventional wisdom, Swiss banking did not originate with the exiled Hugenot bankers of Geneva. Centuries before Louis XIV, Basle had become a principal banking centre although it was not yet part of the Swiss Confederation. From historical beginnings to contemporary comparative analysis, the book offers an authoritative explanation and analysis of the success of the Swiss banks.