Skip to main content
SpringerLink
Log in

The Emerging Framework of Bank Regulation and Capital Control

  • Chapter
Risk Management in Volatile Financial Markets

Part of the book series: Financial and Monetary Policy Studies ((FMPS,volume 32))

Summary

This paper has three objectives: it sets out to provide a theoretical rationale for banking regulation in terms of a brief survey of recent academic research in the area; it attempts to provide a critical appraisal of the evolution of bank regulation in recent years, with a discussion of the pros and cons of existing rules and a (sometimes subjective) assessment of the principal problems which the bank regulatory framework faces today; and it assesses the viability of alternative solutions such as a narrow bank, a limitation of deposit insurance or a shift towards universal banking.

The authors are grateful to Riccardo Rovelli for comments on a previous draft of this paper.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 179.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Akhtar, A. (1983). “Financial Innovations and their implications for monetary policy: an international perspective”, BIS Economie Papers, No. 9.

    Google Scholar 

  • Bank for International Settlements (1982). The International Interbank Market (“Holland Report”), BIS Economic Paper, No. 8.

    Google Scholar 

  • Bank for International Settlements (1992). Recent Developments in International Interbank Relations.

    Google Scholar 

  • Bank for International Settlements (1986). Recent Innovations in International Banking, Basle.

    Google Scholar 

  • Bank for International Settlements (1992). Annual Report, Basle.

    Google Scholar 

  • Bank for International Settlement (1993). Annual Report, Basle.

    Google Scholar 

  • Bank for International Settlements (1994). Public Disclosure of Market and Credit Risks by Financial Intermediaries, Basle, (September).

    Google Scholar 

  • Bank for International Settlements (1994). Public Disclosure of Market and Credit Risks by Financial Intermediaries, Basle, (July).

    Google Scholar 

  • Barone-Adesi, G. (1995). “ALM in Banks”, mimeo.

    Google Scholar 

  • Basle Committee on Banking Supervision (1993a). The Supervisory Treatment of Market Risks. Consultative Proposal, Basle.

    Google Scholar 

  • Basle Committee on Banking Supervision (1993b). Measurement of Banks’ Exposure to Interest Rate Risk, Basle.

    Google Scholar 

  • Basle Committee on Banking Supervision (1994a), Basle Capital Accord: The Treatment of the Credit Risk Associated with Certain Off-Balance Sheet Items: Netting-Amendments and Add-ons-Proposals, Basle, (July).

    Google Scholar 

  • Basle Committee on Banking Supervision (1994b). Risk Management Guidelines for Derivatives, Basle, (July).

    Google Scholar 

  • Basle Committee on Banking Supervision (1995). Basle Capital Accord: Treatment of Potential Exposure for Off-balance Sheet Items, Basle, (April).

    Google Scholar 

  • Basle Committee on Banking Supervision (1995). Planned Supplement to the Capital Accord to Incorporate Market Risks: Consultative Proposal, Basle, (April).

    Google Scholar 

  • Basle Committee on Banking Supervision and Technical Committee of the International Organisation of Securities Commissions (1995). Framework for supervisory information about derivatives activities of banks and securities firms, Basle, (May).

    Google Scholar 

  • Berger, A.N., R.J. Herring and G.P. Szego (1995). “The role of capital in financial institutions”, Journal of Banking and Finance, 19, pp. 393–430.

    Article  Google Scholar 

  • Bhattacharya, S. (1982). “Aspects of monetary and banking theory and moral hazard”, Journal of Finance, 37, pp. 374–84.

    Article  Google Scholar 

  • Bhattacharya, S., and D. Gale (1987). “Preference Shocks, Liquidity, and Central Bank Policy”, in W. A. Barnett and K. J. Singleton (eds.), New Approaches to Monetary Economics, Cambridge University Press.

    Google Scholar 

  • Bhattacharya, S., and A. Thakor (1993). “Contemporary banking theory”, Journal of Financial Intermediation, 3, pp. 2–50.

    Article  Google Scholar 

  • Bhattacharya, S., A. Boot, and A. Thakor (1995). “The economics of bank regulation”, TRACE Discussion Paper, 95–163.

    Google Scholar 

  • Black, F., and J.C. Cox (1976). “Valuing corporate securities: some effects of bond indenture provisions”, Journal of Finance, 31, pp. 351–68.

    Article  Google Scholar 

  • Boot, A. (1995). “Challenges to competitive banking”, paper presented at the Universita Bocconi Conference.

    Google Scholar 

  • Boot, A., S. Greenbaum, and A. Thakor (1993). “Reputation and Discretion in Financial Contracting”, American Economic Review, 83, 1993, pp. 1165–1181.

    Google Scholar 

  • Broaddus, A. (1994). “Choices in banking policy”, Economic Quarterly, Federal Reserve Bank of Richmond, 80(2), pp. 1–11.

    Google Scholar 

  • Calomaris, C., and C. Kahn (1991). “The role of demandable debt in structuring optimal banking arrangements”, American Economic Review, 81, pp. 497–513.

    Google Scholar 

  • Chari, V.V., and R. Jagannathan (1988) “Bank panics, information and rational expectations equilibrium”, Journal of Finance, 43, pp. 749–61.

    Article  Google Scholar 

  • Corrigan, E.G. (1992). “Challenges facing the international community of bank supervisors”, Federal Reserve Bank of New York Quarterly Review, 17(3), pp. 1–9.

    Google Scholar 

  • Dewatripont, M, and J. Tirole (1994). The Prudential Regulation of Banks, Cambridge, Massachusetts: The MIT Press.

    Google Scholar 

  • Diamond, D. (1984). “Financial intermediation and delegated monitoring”, Review of Economic Studies, 51, pp. 393–414.

    Article  Google Scholar 

  • Dowd, K. (1993). “Deposit insurance: a sceptical view”, Federal Reserve Bank of St. Louis Review, 75(1), pp. 14–17.

    Google Scholar 

  • Edwards, F., and M. Canter (1995). “The collapse of Metallgesellschaft: unhedgeable risks, poor hedging strategy or just bad luck?”, The Journal of Futures Markets, May.

    Google Scholar 

  • Elderfield, M. (1995). “Capital incentives”, Risk, 9(8), pp. 20–21.

    Google Scholar 

  • Flannery, M. (1991). “Pricing deposit insurance when the insurer measures bank risk with error”, Journal of Banking and Finance, 15, pp. 975–998.

    Article  Google Scholar 

  • Friedman, M. (1960). A Program for Monetary Stability, New York, Fordham University Press.

    Google Scholar 

  • Group of Thirty (1993). Derivatives: Practices and Principles, New York.

    Google Scholar 

  • Gumerlock, R. (1993). “Double trouble”, Risk, 9(6), pp. 80–91.

    Google Scholar 

  • Hart, O. (1991). “Theories of optimal capital structure: managerial discretion perspective”, National Bureau of Economic Research, Reprint Series.

    Google Scholar 

  • Haubrich, J.G., and P. Wachtel (1993). “Capital requirements and shifts in commercial bank portfolios”, Economic Review, Federal Reserve Bank of Cleveland, pp. 2–15.

    Google Scholar 

  • Hellwig, M. (1991). “Banking, financial intermediation and corporate finance”, in A. Giovannini and C. Mayer (eds.), European Financial Integration, Cambridge: Cambridge University Press.

    Google Scholar 

  • Hellwig, M. (1994). “Liquidity provision, banking and the allocation of interest rate risk”, European Economic Review, 38, pp. 1363–89.

    Article  Google Scholar 

  • Hendricks, D. (1994). “Netting agreements and the credit exposures of OTC Derivative Portfolios”, Quarterly Review, Federal Reserve Bank of New York, 19(1), pp. 7–17.

    Google Scholar 

  • Jacklin, C., and S. Bhattacharya (1988). “Distinguishing panics and information based bank runs: welfare and policy implications”, Journal of Political Economy, 96, pp. 568–92.

    Article  Google Scholar 

  • James, C. (1991). “The losses realised in bank failures”, Journal of Finance, 46, pp. 1223–1242.

    Article  Google Scholar 

  • Jensen, M., and H. Meckling (1976). “The theory of the firm, managerial behaviour, agency costs and ownership structure”, Journal of Financial Economics, 3, pp. 305–60.

    Article  Google Scholar 

  • Jones, D. S., and K. K. King (1995). “The implementation of prompt corrective action”, Journal of Banking and Finance, 19, pp. 491–510.

    Article  Google Scholar 

  • JP Morgan (1994). RiskMetrics™ Technical Document: Second Edition, New York.

    Google Scholar 

  • Kane, E. (1985). The Gathering Crisis in Federal Deposit Insurance, Cambridge, Massachusetts, M.I.T. Press.

    Google Scholar 

  • Kane, E. (1995). “Three paradigms for the role of capitalisation in insured financial institutions”, Journal of Banking and Finance, 19.

    Google Scholar 

  • Kaufman, G.G. (1991). “Capital in banking: past, present and future”, Journal of Financial Services Research, 5, pp. 383–402.

    Article  Google Scholar 

  • Kaufman, G.G. (1992). “Bank contagion: theory and evidence”, Federal Reserve Bank of Chicago.

    Google Scholar 

  • Keeley, M. (1990). “Deposit insurance, risk and market power in banking”, American Economic Review, 80, pp. 1183–1200.

    Google Scholar 

  • Kroszner, R., and R.G. Rajan (1994). “Is the Glass-Steagall Act justified? A study of the US experience with universal banking before 1933”, American Economic Review, 84, 810–32.

    Google Scholar 

  • Kupiec, P., and J. N. O’Brian (1995). “Internal Affairs”, Risk, 8(5), pp. 43–47.

    Google Scholar 

  • Kupiec, P. (1995). “Techniques for verifying the accuracy of risk measurement models”, Federal Reserve Board, mimeo.

    Google Scholar 

  • Kupiec, P., J.N. O’Brian and P. Parkinson (1995). Precommitment Approach to Capital Requirements for Market Risk, Federal Reserve Board, mimeo.

    Google Scholar 

  • Leland, H. (1994). “Corporate debt value, bond covenants and optimal capital structure”, Working Paper, University of California, Berkeley.

    Google Scholar 

  • Leland, H., and D. Pyle (1977). “Informational asymmetries, financial structure and financial intermediation”, Journal of Finance, 32, pp. 371–87.

    Article  Google Scholar 

  • Marquardt, J. (1987). “Financial market supervision: some conceptual issues”, BIS Economic Paper, 19.

    Google Scholar 

  • Mayer, C. (1988). “New issues in corporate finance”, European Economic Review, 32 pp. 1167–1188.

    Article  Google Scholar 

  • McCulloch, J.H. (1993). “Banking without tax-backed deposit insurance”, The Federal Reserve Bank of St. Louis Review, 75(1), pp. 18–21.

    Google Scholar 

  • Merton, R.C. (1976). “Option pricing when underlying stock prices are discontinuous”, Journal of Financial Economics, 3, pp. 125–44.

    Article  Google Scholar 

  • Merton, R.C. (1977). “An analytical derivation of the cost of deposit insurance and loan guarantees; An application of modern option pricing”, Journal of Banking and Finance, 1, pp. 3–11.

    Article  Google Scholar 

  • Merton, R.C. (1978). “On the cost of deposit insurance when there are surveillance costs”, Journal of Business, 51, pp. 439–52.

    Article  Google Scholar 

  • Merton, R.C. (1995). “Financial innovation and the management and regulation of financial institutions”, Journal of Banking and Finance, 19, pp. 461–81.

    Article  Google Scholar 

  • Miller, M. (1995). “Do the M&M propositions apply to banks?”, Journal of Banking and Finance, 19, pp. 483–89.

    Article  Google Scholar 

  • Pennacchi, G. (1987). “Alternative forms of deposit insurance”, Journal of Banking and Finance, 11, pp. 291–312.

    Article  Google Scholar 

  • Peters, S. (1994). “Why are Deposits Sequentially Service Constrained and Insured?”, Working Paper, University of Connecticut.

    Google Scholar 

  • Ronn, E.I., and A.K. Verma (1986). “Pricing risk-adjusted deposit insurance”, Journal of Finance, 41(4), pp. 871–95.

    Article  Google Scholar 

  • Scott, K.E., and T. Mayer (1971). “Risk and regulation in banking: some proposals for deposit insurance reform”, Stanford Law Review, 23, pp. 857–902.

    Article  Google Scholar 

  • Shaffer, S. (1995). “Rethinking disclosure requirements”, Business Review: Federal Reserve Bank of Philadelphia, (May, June), pp. 15–29.

    Google Scholar 

  • Takeda, M., and P. Turner (1993). “The liberalisation of Japan’s financial markets: some major themes”, BIS Economic Papers, No. 34.

    Google Scholar 

  • Tripartite Group (1995). The Supervision of Financial Conglomerates: A Report by the Tripartite Group of Bank, Securities and Insurance Regulators, Basle.

    Google Scholar 

Download references

Authors
  1. Julian S. Alworth
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Sudipto Bhattacharya
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Bocconi University, Milan, Italy

    Franco Bruni

  2. Royal Bank of Scotland, London, UK

    Donald E. Fair

  3. Global Business Network, London, UK

    Richard O’Brien

Rights and permissions

Reprints and permissions

Copyright information

© 1996 Kluwer Academic Publishers

About this chapter

Cite this chapter

Alworth, J.S., Bhattacharya, S. (1996). The Emerging Framework of Bank Regulation and Capital Control. In: Bruni, F., Fair, D.E., O’Brien, R. (eds) Risk Management in Volatile Financial Markets. Financial and Monetary Policy Studies, vol 32. Springer, Boston, MA. https://doi.org/10.1007/978-1-4613-1271-0_15

Download citation

  • DOI: https://doi.org/10.1007/978-1-4613-1271-0_15

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4612-8542-7

  • Online ISBN: 978-1-4613-1271-0

  • eBook Packages: Springer Book Archive

Publish with us

Policies and ethics

Search

Navigation