Shedding Light on Shadow Banking

2018 ◽  
Vol 82 (3) ◽  
pp. 264-276
Author(s):  
Doron Goldbarsht
Keyword(s):  
Financial Markets ◽  
Money Laundering ◽  
Financial Institutions ◽  
Financial System ◽  
Financial Sector ◽  
Shadow Banking ◽  
International Network ◽  
Payment Mechanisms ◽  
The Relationship ◽  
Global Financial System

Excessive regulatory practices to combat anti-money laundering (AML) have the potential to ‘de-bank’ entire regions and deprive certain communities of their participation in traditional financial markets. While protecting the integrity of the global financial system and shutting down some illicit activities, this may also facilitate the development of alternative remittance systems (ARSs) and payment mechanisms, the so-called shadow banking systems, where AML compliance is not adequate. This article will critically re-examine the relationship between the overregulation of financial markets and the shift to ARSs. It will propose a new take on ARS to include illicit activities through an international network of financial institutions and the need for the regulators to consider a better methodology for detecting ARSs outside the conventional financial sector to deal with this problem.

scholarly journals The impact of economic development on the efficiency of the financial sector

Ekonomika ◽  
2021 ◽  
Vol 67 (3) ◽  
pp. 107-117
Author(s):  
Milica Cvetković ◽  
Maja Cogoljević ◽  
Marija Ranđelović
Keyword(s):  
Economic Development ◽  
Financial Markets ◽  
Market Economy ◽  
Financial Institutions ◽  
Financial System ◽  
Financial Sector ◽  
Transition Countries ◽  
Financial Systems ◽  
Production And Consumption ◽  
The Impact

A stable financial sector creates economic development. Speculative actions in financial markets cause disturbances and are an indicator of economic instability. The growth of a modern market economy more than two centuries ago is interconnected with the growth of the financial system. The averment that there is a connection between the growth of the financial and real sectors of the economy is as old as economics science. A developed financial system encourages competition, expands the market, and increases the efficiency of financial institutions. The depth and the breadth of financial markets are growing, which are transmission to the performance and structure of the economy. Through linking savings and investments, the financial system controls and manages the risks that are characteristic of financial operations and facilitates the interaction of production and consumption. The financial systems of transition countries are not sufficiently developed, so this paper aims to point out the interconnectedness and impact of the financial system on macroeconomic stability.

scholarly journals Shadow banking: Regulatory Reform and Its Effectiveness

2019 ◽  
Vol 23 (4) ◽  
pp. 69-79
Author(s):  
V. M. Usoskin
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
Financial System ◽  
Regulatory Reform ◽  
Shadow Banking ◽  
Systemic Risks ◽  
Global Financial System

Over the past three decades, a large group of non-bank financial institutions has been formed in the world economy. These institutions fall outside the realm of traditional banking and take an active part in the lending processes of economic turnover entities. The activities of these institutions, called the shadow banking system (SBS), led to an increase in systemic risks and had a negative impact on the state of the global financial system. This was distinctly displayed during the global financial crisis of 2007–2009. The subject of this article is a series of measures taken by the international and national financial control bodies after the financial crisis to eliminate most risky aspects of shadow banking and to strengthen the system of financial oversight and monitoring. The final aim of the analysis is to evaluate effectiveness of the measures on strengthening control and limiting risks applied by the control bodies of the G-20 countries in the course of the reform to enterprises of the traditional and shadow sectors of the financial system. The results of the analysis show that the reform strengthened positions of traditional banks and improved their ability to resist financial shocks. As to the shadow banking sector, contrary to the statements of the initiators of the reform the regulative measures did not eliminate the systemic risks peculiar to nonbank financial institutions and did not stop their growing activities. This situation threatens the stability of the global financial system and a possibility of a new financial slump retains.

EVALUATION OF FINANCIAL SECURITY OF THE REPUBLIC OF CRIMEA

2020 ◽  
pp. 56-67
Author(s):  
Elena Evgenevna Mashyanova ◽  
Elena Aleksandrovna Smirnova
Keyword(s):  
Financial Markets ◽  
Negative Impact ◽  
Gradual Increase ◽  
Financial System ◽  
Financial Security ◽  
Key Factors ◽  
Factors Affecting ◽  
External Threats ◽  
The Republic ◽  
Global Financial System

In modern conditions of development, financial security is an integral part of the overall security of the region and is formed on the basis of the functioning of the financial system. The complication of relationships between key segments of international financial markets, as well as the limited ability to accurately predict future trends in the development of the global financial system, lead to a gradual increase in the risks that accompany the activities of economic entities, and an increase in the number and scale of internal and external threats that have a negative impact on the financial security of the state. This formulation of the issue requires generalization of approaches to determining the financial security of the region in order to further formalize this issue and determine the key factors affecting it. The article considers the types of financial security, as well as certain areas of ensuring the financial security of the region and their priority. In work the assessment of the level of socio-economic development of the region with a view to ensuring financial security on the basis of which offers the main activities and priority areas of implementation of the investment policy that will ensure financial security of the Republic of Crimea.

Analysis of the Relationship between Currency Redenomination and Financial Transaction Costs in Nigeria

2021 ◽  
Vol 7 (18) ◽  
pp. 59-68
Author(s):  
Hassana Aliyu MOHAMMED ◽  
◽  
Abdurrahman ISIK ◽  
Paul Terhemba IOREMBER ◽  
◽  
...  
Keyword(s):  
Transaction Costs ◽  
Financial Institutions ◽  
Financial Sector ◽  
Chi Square ◽  
User Costs ◽  
Inflationary Pressure ◽  
Cash Payment ◽  
Chi Square Test ◽  
The Cost ◽  
The Relationship

The study analyses the relationship between currency redenomination and financial sector transaction costs in Nigeria using a sample of 200 respondents from ten financial institutions. Applying the Chi-square test, the study reveals that high currency redenomination removes wasteful transactions removes user costs (difficulties arising from memorizing, calculating and carrying large sum of lowest denominations: coins and smaller notes). The results also show that currency redenomination influences inflationary pressure and currency liberalization in Nigeria. Based on the findings the study recommends the introduction of currency redenomination to facilitate the consumers' cash payment and reduce the cost incurred by producers and issuing authorities, and also make payment system more efficient and effective.

scholarly journals Financial system and growth and economic development

VUZF Review ◽  
2021 ◽  
Vol 6 (2) ◽  
pp. 160-170
Author(s):  
Małgorzata Hala
Keyword(s):  
Economic Growth ◽  
Economic System ◽  
Financial Institutions ◽  
Financial System ◽  
Financial Sector ◽  
Real Sector ◽  
The Real ◽  
State And Local ◽  
The Impact

The aim of the article is to present the role of the financial system in economic growth and development. The first part presents the traditional understanding of the relationship between the economic system and economic growth. The second part presents the experience of financial crises and their impact on the conversation on the mutual relations between the financial sector and the real sector. The third part shows the role of the state in the financial system. The article describes the arrangement of interrelated financial institutions, financial markets and elements of the financial system infrastructure.  It shows what part of the economic system the financial system is, and whether it enables the provision of services allowing the circulation of purchasing power throughout the economy. The article presents the important role of the financial system, the role related to the transfer of capital from entities with savings to entities that need capital for investments. It shows the financial system as a set of logically related organizational forms, legal acts, financial institutions and other elements enabling entities to establish financial relations in the real sector and the financial sector, and this system forms the basis of activity for entities using money, enabling the conclusion of various economic transactions, in which money performs various functions. The article also presents the concept of a financial crisis as a situation in which there are rapid changes in the financial market, usually associated with insufficient liquidity or insolvency of banks or financial institutions, and as a result, a decrease in production or its deepening. The article also includes issues related to the impact of public authorities (state and local authorities) on the financial system in the economy.

Selected challenges associated with the reliance on customer due diligence measures to curb money laundering in South African banks and related financial institutions

2021 ◽  
Vol 8 (1) ◽  
pp. 42-66
Author(s):  
Howard Chitimira ◽  
Sharon Munedzi
Keyword(s):  
South Africa ◽  
South African ◽  
Money Laundering ◽  
Financial Institutions ◽  
Financial Institution ◽  
Financial Sector ◽  
Due Diligence ◽  
Role Players ◽  
Customer Due Diligence ◽  
Combat Money Laundering

Customer due diligence is a means of ensuring that financial institutions know their customers well through know-your-customer (KYC) tools and related measures. Notably, customer due diligence measures include the identification and verification of customer identity, keeping records of transactions concluded between a customer and the financial institution, ongoing monitoring of customer account activities, reporting unusual and suspicious transactions, and risk assessment programmes. Accordingly, financial institutions should ensure that their customers are risk assessed before concluding any transactions with them. The regulation of money laundering is crucial to the economic growth of many countries, including South Africa. However, there are still numerous challenges affecting the banks and other role players’ reliance on customer due diligence measures to combat money laundering in South Africa. Therefore, a qualitative research methodology is employed in this article to unpack such challenges. The challenges include the failure to meet the identification and verification requirements by some South African citizens, onerous documentation requirements giving rise to other persons being denied access to the formal financial sector, and the lack of express provisions to regulate the informal financial sector in South Africa. Given this background, the article discusses the challenges associated with the regulation and implementation of customer due diligence measures to enhance the combating of money laundering in South African banks and related financial institutions. It is hoped that the recommendations provided in this article will be utilised by the relevant authorities to enhance customer due diligence and effectively combat money laundering activities in South African banks and related financial institutions.

Non-compliance behavior of de-risking force the EU to enhance anti-money laundering regulation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Law And Economics ◽  
Negative Impact ◽  
Regulatory Framework ◽  
Content Type ◽  
Functional Methods ◽  
Compliance Behavior ◽  
The Relationship ◽  
The Eu

Purpose Recent research shows that because of money-laundering risks, there has been an increase in the off-boarding of certain types of corporate clients in the financial sector. This phenomenon known as “de-risking” has been argued to have a negative impact on society, because it increases the possible risk of money laundering. The purpose of this paper is to analyze whether the de-risking strategy of financial institutions results in an expansion of the regulatory framework concerning anti-money laundering focusing on off-boarding of clients and, if so, is there a way to avoid further regulation by changing present behavior. Design/methodology/approach This paper applies functional methods to law and economics to achieve higher efficiency in combating money laundering. Findings In this paper, it is found that the continuing of de-risking by financial institutions because of the avoidance strategy of money-laundering risks will inevitably result in further regulatory demands regarding the off-boarding process of clients. The legal basis for the introduction of further regulatory intervention is that some of the de-risking constitutes a direct contradiction to the aim of the present regulatory framework, making the behavior non-compliant to the regulation. Originality/value There has been very little research concerning de-risking related to money laundering. The present research has focused on the effect on society and not the relationship between the financial institutions and the regulator. This paper raises an important and present problem, as the behavior of the financial institutions constitute a response from the regulator that is contradicting the thoughts behind the behavior of the financial institutions. It is found that the paper is highly relevant if an expansion of regulation is to be hindered.

Financial System Reform: Regulatory Structure, Financial Safety, Systemic Stability and Competition Policy

1997 ◽  
Vol 8 (2) ◽  
pp. 318-332 ◽  
Author(s):  
Warren Hogan ◽  
Ian G. Sharpe
Keyword(s):  
Financial Markets ◽  
Competition Policy ◽  
Financial System ◽  
Financial Sector ◽  
System Reform ◽  
Regulatory Structure ◽  
Markets And Institutions

The paper provides an assessment of the recommendations of the Financial System Inquiry and the Government's reform proposals relating to the regulatory structure, financial safety and the mega-prudential regulator, systemic stability, and competition policy in the financial sector. It is argued that key reform proposals are based on explicit or implicit assumptions relating to the workings of financial markets and institutions. The Report fails to test those assumptions against contemporary and prospective circumstances to determine the practical worth of the recommendations.

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