By Gerard Caprio Jr, Douglas D Evanoff, George G Kaufman
Cross-border banking, whereas having the opportunity of a extra effective monetary quarter, additionally creates capability demanding situations for financial institution supervisors and regulators. It calls for cooperation by means of regulatory gurus throughout jurisdictions and a transparent delineation of authority and accountability. That delineation is usually no longer current and regulatory gurus frequently have considerably diverse incentives to reply whilst cross-border-active banks stumble upon problems. each one of these concerns have in basic terms started to be heavily evaluated. This quantity, one of many first makes an attempt to deal with those matters, brings jointly specialists and regulators from diversified nations. the wide variety of subject matters mentioned comprise: the present panorama of cross-border financial institution job, the ensuing aggressive implications, rising demanding situations for prudential legislation, protection internet issues, failure solution matters, and the capability destiny evolution of foreign banking.
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Additional info for Cross-Border Banking: Regulatory Challenges
Remarks on Cross Border Banking: Regulatory Challenges 25 The direction of Basel Committee guidance, as well as regulatory comity among the developed world, has tried to deal with the excessive burden, contradictory dictates and occasional conflicts between supervisors by emphasizing the importance and primacy of the home-country supervisor. In theory, where a bank has "comprehensive consolidated supervision" from the home country, there is to be considerable deference paid to that supervisor's decisions and assessments.
That is clearly the case in some Eastern European countries where banks like Citi and some of the Scandinavians are very active. There is also the particular case of GE Capital which owns banks in some Eastern European countries. Supervisors in those countries reasonably ask whether there is not a risk that, in the event of serious liquidity or solvency problems in the parent, their subsidiaries might not be cast adrift. A related, albeit slightly different point is that some banks with large operations overseas may have their head offices in countries where the capacity to supervise and conceivably provide financial support to the whole may be in doubt.
Regulators also have incentives to cooperate and share more information in order to economize on scarce resources. Remember, effective cross-border regulation and supervision is a lot about trust and communication. You cannot communicate effectively with, much less trust, someone who operates a system not even remotely close to your own. 3. What to Do — Some Suggestions I have four suggestions on what to do in the short term to make progress. First, international organizations involved in rule making and standard setting need to make sure their governance and processes are adapted to the world I have just described.