MODULE 4 Flashcards
challenges and complexities financial
institutions face
- legal frameworks
- international standards
- industry regulations
issues arise from
- the need to balance financial stability* transparency
- protection against fraud
- manage the risks inherent in global transactionsand modern financial systems
designed to maintain the stability, integrity, andsecurity of financial systems
REGULATORY FRAMEWORKS
ensure that financial institutions operatewithinclear legal boundaries while mitigatingriskssuchas fraud, money laundering, and financial crises
REGULATORY FRAMEWORKS
provide oversight of electronic bankingoperations to address the unique challengesofdigital transactions, cybersecurity, andcross-border transactions
REGULATORY FRAMEWORKS
Global Regulatory Frameworks for Finan
*help maintain the soundness of theinternational financial system
*set standards for capital adequacy
*risk management
*market behavior
are a set of international banking regulations developed by the Basel Committee on Banking Supervision (BCBS) that establish standards for capital adequacy, risk management, and bank supervision.
Basel Accords
Introduced in 1988, it focused on credit risk and mandated banks to hold capital equivalent to 8% of their risk-weighted assets to
Basel I
Enhanced Basel I by adding guidelines on operational risk andmarketrisk,focusing on improved risk management
Basel II
Developed after the 2008 financial crisis, ____ introduced more stringent capital requirements, leverage ratios, and liquidity requirements. It aims to ensure that banks have enough capital to withstand financial stress and avoid systemic crises.
Basel III
are designed to prevent the misuse of financial systemsforillicitactivities such as money laundering and terrorist financing.
Anti-Money Laundering (AML) Regulations
was enacted in response to the 2008 financial crisis. It introduced comprehensive reforms to reduce risks in the financial system, including stricter capital requirements, oversight of systemically important financial institutions (SIFIs), and enhanced consumer protections.
Dodd-Frank Wall Street Reform and Consumer Protection Act
Prohibits banks from engaging in proprietarytradingandlimits their investment in hedge funds andprivateequityfunds to reduce risky behavior that couldleadtofinancialinstability
Volcker Rule
is a European regulatory frameworkdesignedtoincrease transparency and protect investors inthefinancialmarkets. It governs financial institutionsthatprovideinvestment services, covering areas suchas tradereporting,transaction transparency, and investor protection
MiFID II (Markets in Financial Instruments Directive,EU)
is an EU regulation that aims to improve competition, innovation, and security in the electronic payments market. It requires stronger customer authentication and allows third-party providers to access bank account information with customer consent, enhancing innovation in the fintech sector.
PSD2 (Payment Services Directive 2, EU)
Ensures that online payments and access to financial accountsaresecure by requiring multi-factor authentication
Strong Customer Authentication (SCA)
Allows third-party financial service providers toaccessconsumers’banking information, increasing competition andinnovation.
Open Banking
in the United States mandates that financial institutions, including those offering electronic banking services, must keep records and file reports on cash transactions and suspicious activities that may be linked to money laundering or other financial crimes.
must monitor digital transactionsandcomplywith AML regulations
E-banking platforms
faced one of the largest regulatory fines inrecenthistorywhen it was found that employees had created millionsoffraudulentaccounts without customer consent. The scandal highlightedaseverelack of internal controls and a toxic sales culture drivenbyaggressivecross-selling tactics. The bank was fined $3 billion, andthecaseledtoreforms in sales practices across the banking industry
