Part 1 Flashcards
What are the 4 banking regulation actors?
- Prudential authorities
- Central Banks
- Accounting standards authorities
- Consumers association
What is the role of prudential authorities?
Secure the banking system:
- investors protection
- prudential macro analysis
What is the role of central banks?
Guarantee the good financing the economy:
- price stability
- banks supervision
What is the role of the accounting standards authorities?
Give a fair vision of the financial institution health.
What is the role of Consumer Associations?
Promote the interest of different actors:
- consumer protection
- market transparency
What are the 3 international supervisory authorities?
- Bank of International Settlements
- Financial Stability Board
- International Monetary Fund
What is the role of the Bank of International Settlement?
- “Central bank of central bank”
- Mission is to assist central banks in the conduct of
their monetary policies, in the maintenance of financial stability, to promote international cooperation and act as the central bank of central banks - 60 members
- Coordinates and animates the Basel Committee
What is the role of the Financial Stability Board?
- Identify vulnerabilities in the global financial system,
- Develop and implement regulatory and supervisory principles
What is the role of the IMF?
- Monitors the international monetary system,
- Follows economic and financial policies
- Helps the international monetary system achieve its fundamental objective: to facilitate the exchange of goods, services and capital between countries and thereby support economic growth
What are the missions of the ECB?
1) Maintain price stability;
2) Manage the Keynesian triangle;
3) Promote the financial integration of Europe and ensure its stability;
4) Money Supply;
5) Monitor financial risks
What is the mission of the Financial Stability Assessment Program (FSAP)?
Conduct a comprehensive and in-depth analysis of a country’s financial sector to assess its stability and development.
Evaluations are conducted jointly with the IMF and the World Bank for developing and emerging countries and by the IMF only for advanced countries. FSAP integrates into IMF surveillance (observations, consultations).
What are G-SIBs?
G-SIBs are banks that bear a systemic risk of failure and are subjected to additional capital requirements.
What are the 5 criteria to classify an institution as a G-SIB?
- Size
- Interconnection
- Replacement capacity by another institution offering the same service
- International activities
- Complexity of activities
What is the ESFS?
European Supervisory Financial System
What are the 3 supervisory authorities in the ESFS?
- European Securities and Market Authorities (ESMA)
- European Banking Authority (EBA)
- European Insurance and Occupational Pensions Authority (EIOPA)
What is the role of the EBA?
- Contribute to the creation of the European Single Rulebook in banking.
- Ensure banking stability
What is the role of the ESMA?
- Safeguard the stability of the EU’s financial system by enhancing the protection of investors ad promoting stable and orderly financial markets.
- Assess risks to investors, markets and financial stability, completing a rulebook for EU financial markets, promoting supervisory convergence and directly supervising credit rating agencies and trade repositories.
What is the role of the EIOPA?
- Ensure the short, medium and long term stability and efficiency of the financial system for the EU
- Promote a sound regulatory framework and consistent supervision of insurance and occupational pensions sectors in Europe
- Protect the rights of the policyholders, pension scheme members and beneficiaries
What are the 3 pillars of the regulatory industry?
- Minimum Capital requirement
- Supervisory review process
- Disclosure requirement of banks
What are Minimum Capital Requirements?
Pillar 1 Calculation of minimum capital requirements for - credit risk - counterpart risk - market risk - operational risk
What is the supervisory review process?
Pillar 2
- Regulatory framework for banks and supervisory framework
- Strengthening prudential supervision by national supervisors
- Ensure that banks have sufficient level of capital with respect to risks with the possibility for the regulator to raise the required regulatory capital
- Encourage banks to develop and use better risk management techniques including liquidity management
- Apprehend risks not assess through pillar 1 (e.g. overall rate risk)
What is disclosure requirement of banks?
Pillar 3
- Promote the security and soundness of banks and the financial system through transparent communication.
- Provoke an emulation between institutions as to the quality of their processes and their internal management tools and a “market sanction” (clients investors, rating agencies) on the profile and risk management of the Bank
What are the calculation methods of Credit Risk?
- Standard Approach
- Foundation IRB approach
- Advanced IRB approach
What are the calculation methods of market risk?
- Standard approach
- Approach by internal models
What are the method of calculation of operational risk?
- Basic Indicator Approach
- Standardised Approach
- Advanced Approach
What is the Mac Donough ration?
Total equity > 8% of assets
What were Basel III mains ammendements?
- CRD III
- CRD IV
What is CDR III?
- Increase in regulatory capital related to the trading book
- Increase in regulatory capital for re-securization transactions
- Improved financial communication
- Modification of the remuneration policy
What is CDR IV?
- Review of the counterpart risk coverage
- Introduction of the leverage ratio
- A cyclical cushion
- Minimum liquidity
- Notions of systemic institutions
