BANKING REGULATION

Developments in Banking Regulation

Developments in Banking Regulation

Introduction

The recurrent crises have been occurring in the global economy during son last decades revealed that economic stabilization processes are crucial for achieving healthy economies and economic growth. This can be achieved with the existence of sound financial systems to avoid the danger of local destabilization, and that the communicating vessels of the globalized world can be transmitted to other economies producing systemic risks. The way to achieve stability is to maintain the healthy functioning of financial institutions, through proper risk management and maintaining a sufficient level of capital.

Supervision and regulation exists because one of the main objectives of this is to maintain financial stability. Countries have made ??progress, and continue, in prudential regulation, which creates similar playing for a professional management of assets and liabilities of banks, commercial and operational management, without control, so far, the amount and price of credit, although the amount of the credit is regulated as risky asset risk weighting of 100%, depending on the size of each bank's capital adequacy. (Collin, 2009, 80)

The weaknesses of Basel II have been highlighted following the recent financial crisis, showing that international regulations do not adequately cover certain transactions subject to credit risk, emphasized the characteristics of the cycle and forget to consider the effects of liquidity risk. It has therefore been necessary to amend and approve the new Basel III, which will require new and higher capital requirements. The paper critically evaluates the new banking regulation with respect to financial crises and the future of banking industry in this regard. First we understand new regulation (Basel III) and further critically evaluate these regulations and assess the success of the regulation. (Darby, 1990, 120)

New regulatory framework: Basel III

The set of rules of international financial regulation is what is known as Basel III. These are the basic guidelines governing capital requirements for commercial banks that have grown and hardened in the wake of the financial crisis has exposed some weaknesses and failures of lump in the international financial system. It is therefore vital, to know the spectrum that covers Basel III and implications arising from the new rules on solvency and liquidity is expected to begin to implement by 2013 and 2019 (source of many corporate moves likely will see in the medium-long term). (Collin, 2009, 80)

The main point is the new financial regulation is a reference to the improvement in capital quality. For some time this part of financial sophistication has only blurred the distinction between what is capital and what is not: there are financial products called hybrids because of its changing nature can function as capital under certain circumstances and as debt elsewhere. That is why, the capital of banks is not uniform but it incorporates different categories according to their ability to absorb losses on the one hand, and on the other hand why their credit portfolio incorporates a heterogeneous degree of risk. Leaving technicalities aside (of which we soon), the Basel Committee has reinforced ...