scholarly journals Public lending to private hedge funds is inefficient, unstable, unconstitutional and unanimously disagreeable

2016 ◽  
Vol 5 (2) ◽  
pp. 40-49
Author(s):  
Sankarshan Acharya
Keyword(s):  
Moral Hazard ◽  
Central Bank ◽  
Hedge Funds ◽  
Banking System ◽  
Central Banking ◽  
Bank Loans ◽  
Public Funds ◽  
Private Banks ◽  
The Government ◽  
Private Banking

Public funds include federally insured deposits held under the custody of private banks, central bank loans and taxpayer funds. The principal finding of this paper is that lending such public funds through a private banking system to private hedge funds allied with the banks is inefficient, unstable, fundamentally unfair (unconstitutional) and unanimously disagreeable. This finding is akin to the unanimously agreeable safe central banking policy (Acharya, 1991-2016) which, in dynamic general equilibrium, (a) eliminates federal guarantee of bank deposits, (b) offers every business enterprise and household an option to keep in the central bank any part of its deposits it wants to be held absolutely safely, (c) completely deregulates all private banks without any privilege to rob public or private wealth like too-big-to-fail or too-big-to-be-jailed status or the power of market making and clearing. Safe central banking is the only way to make private banks responsible to hold sufficient capital to attract uninsured private deposits like the trading houses currently do. The private banks will then have complete freedom to lend their uninsured deposits to private hedge funds. The Volker Rule (NYT, January 30, 2010), incorporated in the Dodd-Frank Act of 2010, is an infeasible and unworkable band-aid for the moral-hazard driven systemic robbery of wealth creators wrought by the government-ordained private banking custody of public funds. The established systemic moral-hazard problem can be efficiently and constitutionally resolved only through unanimously agreeable safe central banking. Current proposals on overhauling of Fannie and Freddie made by various pundits of systemic robbery amount to a gargantuan amount of public lending to private hedge funds and, hence, inefficient, unstable, unconstitutional and unanimously disagreeable.

LIQUIDITY, INTERBANK MARKET, AND THE SUPERVISORY ROLE OF THE CENTRAL BANK

2003 ◽  
Vol 7 (2) ◽  
pp. 192-211 ◽  
Author(s):  
Young Sik Kim
Keyword(s):  
Central Bank ◽  
Banking System ◽  
Central Banking ◽  
Bank Loans ◽  
Interbank Market ◽  
Monitoring Cost ◽  
Delegated Monitoring ◽  
The Individual ◽  
Cash Reserves

This paper provides an explanation for the supervisory role of the central bank in a monetary general equilibrium model of bank liquidity provision. Under incomplete information on the individual banks' liquidity needs, individual banks find it optimal to invest solely in bank loans holding no cash reserves, and rely on the interbank market for their withdrawal demands. Using the costly state verification approach under uncertainty in aggregate liquidity demands, the supervisory role of the central bank as a large intermediary arises as an incentive-compatible arrangement by which banks hold the correct level of cash reserves. First, it takes up a delegated monitoring role for the banking system. Second, it engages in discount-window lending at a penalty rate, where the discount margin covers exactly the monitoring cost incurred. Finally, under the central banking mechanism, currency premium no longer exists in the sense that currency is worth the same as deposits having an equal face value.

scholarly journals Debt-Sale Securities as a Monetary Policy Instrument in the Islamic Banking System of Iran

2021 ◽  
pp. 31-40
Author(s):  
Hossein Meisamy
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Market ◽  
Banking System ◽  
Financial System ◽  
Policy Instrument ◽  
Islamic Banking ◽  
Private Banks ◽  
The Government ◽  
First Time

This paper discusses the legitimacy of securitizing the central bank receivables from the government and banking system in the Iranian financial market and making use of this instrument to conduct monetary policy. Ijtihad or independent jurisprudential reasoning based on Imamiah Fiqh (prevailing in the Iranian Islamic banking system), is used as paper methodology. The results show that considering the jurisprudential ‘ownership unity’ between the central bank, the government, and governmental banks in the Iranian banking system, securitizing the central bank receivables from the government or the governmental banks is not legitimate and not Shariah-compliant. Nevertheless, it is possible to issue debt-sale securities based on the debts of private banks to the central bank. Therefore, issuing debt-sale securities based on central bank receivables from the private banks can be considered a suitable instrument for conducting Shariah-compliant monetary policy in the Islamic banking system of Iran. This paper discusses for the first time the idea of issuing debt-sale securities as a monetary policy instrument in the Iranian financial system. Besides, the analysis is based on the Imamiah School of Fiqh, which is also new.

Financial Safety Indicators under Financial Crises and their Impact on Banking Finance: An Applied Study in Iraqi Banks

2021 ◽  
Vol 39 (11) ◽  
Author(s):  
Mazen Dawood Salman ◽  
Amr Hisham Mohammed ◽  
Hakeem Hammood Flayyih
Keyword(s):  
Central Bank ◽  
Banking System ◽  
International Standards ◽  
Capital Adequacy ◽  
Financial Systems ◽  
Applied Study ◽  
Global Standards ◽  
Private Banks ◽  
The Government ◽  
The One

The ability to monitor the integrity of the financial sector assumes that there are valid indicators for detecting the integrity and stability of financial systems, including partial indicators and indicators of macro-prudence; and pressure tests to measure the resilience of financial systems to shocks. The research aims to review the most important financial safety indicators applied by the Central Bank of Iraq, focusing on applying some indicators to both the banking system on the one hand and a sample of Iraqi banks. The research reached several conclusions, the most important of which is the commitment of the Central Bank of Iraq to international standards such as Basel II, which requires some Iraqi banks to develop their banking methods to pursue banking developments and global standards. Capital adequacy ratios in the Iraqi banking system as a whole and private banks, unlike the government, have also increased, although the latter has achieved relatively high and acceptable levels of more than 12% according to this standard.

scholarly journals Structural and functional differences between state-owned and private banks in Iran

2020 ◽  
Vol 18 (2) ◽  
pp. 51-74
Author(s):  
Amin Jaffari ◽  
Zahra Sohrabi Abad ◽  
Zahra Ghazinezhad
Keyword(s):  
Banking System ◽  
Structural Difference ◽  
Functional Difference ◽  
Private Banks ◽  
The Government ◽  
The Moment ◽  
And Function ◽  
Private Banking ◽  
Role And Function

Banks, as financial institutions, play the role of financial intermediaries: savings, investments, production, employment and growth in the national economy are affected by operations of banks. State-owned and private banks have a relatively similar role and function and the rules and regulations governing them are not very different, because the non-usury banking act was adopted at a time when there was no private bank in the banking system of the country and all acts and regulations governing banking operations were approved by the government’s banking vision. At the moment, banks are moving within the samelegal atmosphere. Hence, the question is whether private banks are taking the path that the government banking system has taken. Despite the similarities, these banks are sometimes subject to different rules and regulations in terms of how to establish, operate and dissolve. This structural difference has led to a functional difference and has often differentiated the ways in which resources are attracted and allocated and made the private banking system somewhat offset the deficiencies of the government banking system.

Study of Increasing Adoption Trends of Digital Banking and FinTech Products in Indian Payment Systems and Improvement in Customer Services

2021 ◽  
pp. 229-255
Author(s):  
Narinder Kumar Bhasin ◽  
Anupama Rajesh
Keyword(s):  
Customer Satisfaction ◽  
Central Bank ◽  
Banking System ◽  
Government Agencies ◽  
Payment Systems ◽  
Online Payment ◽  
Customer Services ◽  
The Government ◽  
Digital Payments ◽  
The Impact

The objective of massive adaptation of digital payments by the banks with the support of the central bank of any country along with their government agencies is to improve customer services and satisfaction in the online payment systems in place of cashless and paperless payment systems. There are very few researches that have focused to measure the higher customer satisfaction based on factors like trust, risk-free, secure, transparent, accountability of banks, fintech, regulator, and payment system operators. This chapter analyzes the impact of digital banking and fintech in the Indian banking system, initiatives taken by RBI, NPCI, and the government to build the strong trust of customers in online payment systems to ensure improvement in customer services with higher customer satisfaction.

Part I Financial Markets, 3 UK Central Banking and Financial Stability

2021 ◽  
Author(s):  
Morton Guy ◽  
Marsh Andrew
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Central Banking ◽  
Debt Management ◽  
National Debt ◽  
Legal Tender ◽  
Bank Of England ◽  
The Government ◽  
The Uk ◽  
William Iii

This chapter talks about the Bank of England as the UK's central bank, which was established in 1694 by a Charter granted by King William III and Queen Mary II under the authority of an Act of Parliament. It explains the principal object of the Act in creating the Bank as a vehicle for raising money for the government. It also discusses how the Bank was closely associated with the raising and management of the national debt since its inception, which is a function that the Bank retained until the creation of the UK Debt Management Office (DMO) in 1998. This chapter highlights how the Bank raised money by issuing of banknotes, which became widely used as a convenient means of making large—value payments. It points out that the Bank of England notes were not formally legal tender until 1833.

scholarly journals Comportamiento de la cartera comercial de los bancos privados del ecuador, 2010-2018

ECA Sinergia ◽  
2021 ◽  
Vol 12 (1) ◽  
pp. 95
Author(s):  
Lady Andrea Andrea León Serrano ◽  
Josselyn Lissbeth Chamba Bernal ◽  
Samantha Abigail Vega Aguilar
Keyword(s):  
Price Index ◽  
Consumer Price Index ◽  
Banking System ◽  
Country Risk ◽  
Short Term ◽  
Mobile Media ◽  
Palabras Clave ◽  
Private Banks ◽  
Private Banking ◽  
Payment Rate

  El presente estudio tiene como objetivo determinar el comportamiento de la cartera comercial del sistema bancario privado del Ecuador durante el período 2010-2018, los factores considerados corresponden a cartera improductiva, tasa de morosidad, Producto Interno Bruto (PIB), Índice de precios del consumidor, riesgo país, variación de la deuda pública y liquidez. Los datos fueron obtenidos de la Superintendencia de Compañías, Banco Central del Ecuador y Superintendencia de Bancos. La metodología plantea dos modelos econométricos, el primero el Univariante Autoregresivo Integrado Media Móvil (ARIMA) por las estimaciones de las variables a corto plazo y el segundo Multivariante del Análisis de la Covarianza (ANCOVA) que permite relacionar variables con el comportamiento de la cartera comercial. Los principales resultados determinan que los factores de estudio provocan alteraciones en la cartera comercial, por lo tanto, las conclusiones se deducen a un sistema bancario sensible ante las crisis económicas, especialmente a factores externos como el precio del petróleo y planteamientos de políticas económicas.   Palabras clave: Cartera comercial; morosidad; liquidez; bancos privados; Ecuador.   ABSTRACT   The objective of this study is to determine the behavior of the commercial portfolio of the private banking system of Ecuador during the period 2010-2018, the factors considered correspond to unproductive portfolio, late payment Rate, Gross Domestic Product (GDP), consumer price index , country risk, variation of public debt and liquidity. The data were obtained from the Superintendence of Companies, Central Bank of Ecuador and Superintendence of Banks. The methodology proposes two econometric models, the first the Mobile Media Integrated Autoregressive Univariate (ARIMA) by the estimates of the short-term variables and the second Multivariate of the covariance analysis (ANCOVA) allows to relate variables with the behavior of the commercial portfolio. The main results determine that the study factors cause alterations in the commercial portfolio, therefore, the conclusions are deduced to a banking system sensitive to economic crises, especially to external factors such as the price of oil and economic policy approaches.   Keywords: Commercial portfolio; late payment; liquidity; private banks; Ecuador.

scholarly journals Economic Accounts and Financial Systems

2021 ◽  
pp. 1-9
Author(s):  
Ulrich Bindseil ◽  
Alessio Fotia
Keyword(s):  
Central Bank ◽  
Balance Sheet ◽  
Central Banking ◽  
Lender Of Last Resort ◽  
Financial Systems ◽  
Financial Flows ◽  
Balance Sheets ◽  
The Government ◽  
Real Assets ◽  
Bank Money

AbstractThis chapter introduces the system of accounts of the main sectors of the economy (households; non-financial corporations, the government; banks, and the central bank), describing how these sectors are interrelated through financial claims and liabilities. A financial system, consisting of commercial banks and the central bank, manages flows of funds originating from households, without these flows causing a need for the real sectors to liquidate illiquid real assets. The basic types of assets and liabilities are: real goods, gold, banknotes, deposits, bonds, loans, and equity. We explain how the shortcomings of both IOU and commodity-money based financial systems can be solved via establishing a central bank. A central bank is defined here by its balance sheet and central bank money is the central bank’s basic liability. Both monetary policy implementation and lender of last resort issues relate to liquidity flows within balance sheets. Understanding the logic of basic financial flows is therefore the basis for understanding central banking.

scholarly journals Central Banking in Modern Democracies: Private vs. Public Control

2019 ◽  
Vol 11 (2) ◽  
pp. 233-254
Author(s):  
Panagiotis Kotsios
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Banking Sector ◽  
Central Banking ◽  
Global Finance ◽  
Bank Management ◽  
Long Run ◽  
The World ◽  
The Status ◽  
Private Banking

Central banks are among the most powerful institutions in the world: they are granted a legal monopoly in the issuance of money, set interest rates, monitor the banking sector and generally control a country’s money supply and monetary policy. Their decisions and actions affect directly or indirectly almost every economic activity on the planet. However, most of these institutions decide and act independently from government, they are managed by appointed rather than democratically-elected officials and these officials usually come from the private banking sector. These facts generate questions about the functionality of the system and its efficiency in managing global finance. The goal of this research is to investigate the status of central bank management and ownership across the world today, and examine both philosophically and ethically the arguments for and against central bank independence in modern democracies. The analysis concludes that modern democracies should reassess the structure of central banking and address methods and practices that could possibly jeopardize economic development and the effective functioning of democracy in the long run.

scholarly journals Sharīʿah-compliant central banking practices: lessons from Muslim countries’ experience

2020 ◽  
Vol 12 (1) ◽  
pp. 7-26
Author(s):  
Zaheer Anwer ◽  
Shabeer Khan ◽  
Muhammad Abu Bakar
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Islamic Law ◽  
Financial Institution ◽  
Central Banking ◽  
Policy Implications ◽  
Content Type ◽  
Muslim Countries ◽  
Muslim Majority ◽  
The Government

Purpose The purpose of this study is to document how a central bank can perform its primary and secondary functions in a Sharīʿah-compliant manner. It also seeks to investigate the outcomes of the experiments of Muslim-majority countries in this regard. Design/methodology/approach As a first step, a detailed review of existing literature is conducted, which discusses the views of scholars and practitioners on the central banking mechanism in a fully Sharīʿah-compliant financial system. Moving further, the case studies of Iran, Sudan and Pakistan are presented to highlight experiences of regulators from three Muslim-majority countries, which aimed to achieve full compliance with Sharīʿah (Islamic law) principles related to Islamic finance. To evaluate their models, an assessment of their practices is performed in the light of Sharīʿah rules and principles based on existing literature. Finally, the issues involved in establishing a Sharīʿah-compliant central bank (SCCB) are discussed and improvements are suggested. Findings It is found that Iran played an effective role in pursuing broader objectives of monetary policy by setting priorities for credit allocation and assisting the government in reducing expenses; however, with respect to instruments, its experience is limited to the rebranding of conventional products. Sudan has not only used monetary policy to effectively curb inflation but also it has introduced various indirect instruments to perform monetary operations. Pakistan succeeded in formulating a theoretical roadmap to establish a SCCB but the desired objectives could not be achieved because of multiple factors. Practical implications This study has important policy implications for regulators and policymakers from Muslim countries, who can use the findings in shaping effective Sharīʿah-compliant central banking practices in their respective countries. Originality/value This study discusses the salient features of an important Islamic financial institution, the central bank and evaluates the experiments of three Muslim-majority countries in implementing Sharīʿah-compliant central banking practices. To the best of the knowledge, this evaluation has not been performed in the existing literature and the present study fills in this gap.

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