Year:    2011

Author:    Rehm, Hannes

Credit and Capital Markets – Kredit und Kapital, Vol. 44 (2011), Iss. 3 : pp. 317–338

Abstract

Reforming the National and the International Financial Architecture

This article starts with an examination of the regulatory policy requirements to be met by a financial architecture which takes account of changes in market conditions and in the behavior of market actors.

The analysis focuses on the starting points of a macro prudential banking supervision system permitting early identification of systemic risks as well as on an evaluation of the instruments appropriate for counteracting such risks. In this connection, the article discusses concepts for raising the ability to bear risks, limiting refinancing risks as well as for possibilities to avoid regulatory arbitrage in "shadow banking systems„. Finally, basic concepts are introduced designed to prevent the regulatory policy-makers, who bear responsibility for the functioning ability of the banking system, from being confronted with continuous blackmail by the banking industry, but who are able to ensure an orderly market exit of the respective credit institution at the expense of its owners and creditors in the event of any financial distress threatening the existence of the institution and even the whole system. In this context, the instruments of the German restructuring act are appreciated.

In spite of everything, it must be expected that the speed of regulatory action in the large industrial states will continue to be different in the medium term. In this connection, the need is not so much for additional regulatory points of detail, but for a total concept. Regulatory policies in banking come to their limits where the intended objectives are not supported by correspondingly oriented behaviors of bank managers themselves.