The regulation of banks and securities firms

Since 1986, three developments have greatly changed the shape of financial services regulation in the UK: 1. the emergence of a European Community (EC) structure of financial regulation, 2. moves in the G10 countries toward the international harmonization of capital adequacy standards for banks, and...

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Bibliographic Details
Published in:European economic review 1990-05, Vol.34 (2), p.587-597
Main Author: Schaefer, Stephen M.
Format: Article
Language:English
Subjects:
Banking
Banking industry
Banks
Capital
Capital requirements
Default
Economic theory
Financial services
Mathematical models
Regulation
Regulation of financial institutions
Securities industry
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Summary:Since 1986, three developments have greatly changed the shape of financial services regulation in the UK: 1. the emergence of a European Community (EC) structure of financial regulation, 2. moves in the G10 countries toward the international harmonization of capital adequacy standards for banks, and 3. the development of self-regulatory bodies. Under the Second Banking Directive and the associated Directives on capital adequacy, EC credit institutions will be able to carry out investment business and traditional banking business anywhere in the EC. Compared with the treatment of default risk in the EC-Basle Committee (EC-G10) and the Securities and Investments Board (SIB) rules, the SIB's approach to position risk is a significant step forward. In the EC-G10 proposals, the treatment of options is limited to the default risk of counterparties. Issues that regulators and economists might fruitfully debate include determining the cost that capital requirements impose on financial institutions.
ISSN:0014-2921
1873-572X
DOI:10.1016/0014-2921(90)90131-H