Applying lessons learnt from deficiencies in the basel accords to Solvency II

2013 ◽  
Vol 6 (2) ◽  
pp. 309-328
Author(s):  
Johann Jacobs ◽  
Gary Van Vuuren
Keyword(s):  
European Union ◽  
Financial Crisis ◽  
Banking Sector ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Capital Adequacy ◽  
Considerable Progress ◽  
Eu Legislation ◽  
Basel Accords ◽  
Made In

Solvency II is the new European Union (EU) legislation that will review the capital adequacy regime for the insurance industry. Considerable progress has been made in the banking sector with the implementation of the Basel Accords (Basel). The implementation of Solvency II, therefore, brings with it an opportunity for the insurance industry to assess the successes, weaknesses and shortcomings experienced by the banking sector's implementation of Basel so as to learn from them and ensure that Solvency II's implementation duplicates the successes and avoids the failures of Basel's. This article critically explores weaknesses and failures of Basel which were exacerbated and/or exploited by the financial crisis of 2007-2010 and provides advice on how these might be mitigated or avoided in the implementation of Solvency II.

The Financial Crisis, Basel Accords and Bank Regulations: An Overview

2017 ◽  
Vol 7 (2) ◽  
pp. 225
Author(s):  
Mona A. ElBannan
Keyword(s):  
Risk Management ◽  
Financial Crisis ◽  
Banking Sector ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Management Tools ◽  
Information Transparency ◽  
Minimum Capital ◽  
Basel Accords ◽  
As Stress

This theoretical study presents the different phases for the evolution of Basel Accords since 1988, and the continual efforts of Basel Committee on banking supervision to set out an effective framework to improve the banking sector governance and performance. In literature, compliance with Basel requirements concerning minimum capital requirements, powerful supervision and effective market discipline through information transparency and disclosure have attracted many researchers to study its impact on bank performance and cost of capital. In spite of the risk-based capital adequacy, regulatory and supervisory requirements set by Basel Accords, the financial crisis 2007, which causes instability and turmoil in the whole banking sector, was induced mainly by weak risk management measures, such as stress testing and other risk management tools that were unable to forecast the losses and the adverse unexpected outcomes and determine the size of capital needed to overcome severe shocks.

scholarly journals Corporate governance of insurers in Germany. German National Report

2020 ◽  
Vol 109 (1) ◽  
pp. 41-64
Author(s):  
Jens Gal
Keyword(s):  
Corporate Governance ◽  
Financial Crisis ◽  
Banking Sector ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Competitive Environment ◽  
Insurance Sector ◽  
The Past ◽  
Good Corporate Governance ◽  
Paternalistic Approach

Abstract Corporate governance is the set of rules, be they legal or self-regulatory, practices and processes pursuant to which an insurance undertaking is administrated. Good corporate governance is not only key to establishing oneself and succeeding in a competitive environment but also to safeguarding the interests of all stakeholders in an insurance undertaking. It is insofar not surprising that mandatory requirements on the administration of insurance undertakings have become rather prolific in recent years, in an attempt by regulators to protect especially policyholders against perceived risks hailing from improperly governed insurance undertakings. In Germany this has been regarded by many undertakings as an overly paternalistic approach of the legislator, especially considering that the German insurance sector has experienced for decades if not centuries a remarkably low number of insolvencies and that German insurers were neither the trigger nor the (especially) endangered actors in the financial crisis commencing in 2007. Notwithstanding the true core of this criticism, that the insurance industry was taken to a certain degree hostage by the shortcomings within the banking sector, the reform of German Insurance Supervisory Law via implementation of the Solvency II-System has brought many advances in the sense of better governance of insurance undertakings and has also brought to light many deficiencies that the administration of some insurance undertakings may have suffered from in the past, which are now more properly addressed.

Maintaining Financial Stability in the Banking Sector

2019 ◽  
pp. 30-48
Author(s):  
Meltem Gurunlu
Keyword(s):  
Risk Management ◽  
Management System ◽  
Financial Stability ◽  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Basel Accords ◽  
Risk Management System ◽  
Strategic Approach ◽  
Global World

Maintaining financial stability in the banking sector through a well-functioning risk management system is a strategic approach in today's global world where the risks have become much more diversified than ever. This chapter was undertaken in order to investigate the risk management topic by focusing on the experiences learned from the banking crises up-to-date and implications of the Basel Accords which outlined capital adequacy standards to prevent such crises. With paying special attention to the case of Turkish banking system, main challenges and possible solutions are also discussed.

scholarly journals The Growing Importance of the Financial Sector in the Founding Countries of the European Union

2021 ◽  
Vol 2 (26) ◽  
pp. 37-49
Author(s):  
Tomasz Florczak
Keyword(s):  
European Union ◽  
Economic Development ◽  
United Kingdom ◽  
Financial Crisis ◽  
21St Century ◽  
Banking Sector ◽  
Financial Sector ◽  
Developed Countries ◽  
The Other ◽  
The European Union

The economies of the 21st century countries operate on the principle of connected vessels. A significant element of changes in economies is the growth of the financial sector. The process of financial sector growth is often referred as financialization. The significant impact of this sector on economic development was shown during the financial crisis of 2008. Financialization is more visible in highly developed countries. Undoubtedly the founding countries of the European Union belong to highly developed countries. It is possible that the financialization is higher in bigger countries like France, Germany, Italy or United Kingdom, which can also have bigger financial sectors. From the other side there is also country, which economy is based on banks. The aim of the article is to indicate the growth of the financial sector in the founding countries of the European Union. To determine the growth of the financial sector, the author used the indicators appearing in the literature of subject. There are indicators relating to functioning of the economy and banking sector. The second method helps to determine in which country financialization is higher. To made the research there was used zero unitarization method. The results of the study allows to determine in which of the subjects the financial sector is at a higher level of development. It is possible, that during researched period there were changes in financializiation of researched countries.

EU Bank Regulation after the Great Financial Crisis

2021 ◽  
pp. 163-182
Author(s):  
Agnieszka Smoleńska
Keyword(s):  
European Union ◽  
Financial Crisis ◽  
Financial Stability ◽  
Banking Sector ◽  
Regulatory Regime ◽  
The European Union ◽  
Financial Repression ◽  
Cross Border ◽  
Crisis Prevention ◽  
New Framework

The chapter outlines the main features of the post-crisis regulatory regime for banks in the European Union. It traces the evolution of the approach taken by EU legislators which transformed the deregulation which prevailed prior to the Great Financial Crisis (GFC) into a regulatory regime which though far from financial repression known in the 1970s, is oriented towards functionally prioritizing financial stability and banks’ functions in the broader economy. This is achieved through co-responsibilization of the banking sector for public objectives, explicit regulation of structure and operations as well as far-reaching powers granted to new oversight authorities. The chapter explains the features of such a new bespoke regulatory regime for EU cross-border banking drawing on the new framework for bank crisis prevention and management, that is EU resolution law.

Direct or Indirect Regulation of Hedge Funds: A European Dilemma

2011 ◽  
Vol 2 (4) ◽  
pp. 463-480 ◽  
Author(s):  
Giorgio Tosetti Dardanelli
Keyword(s):  
European Union ◽  
Financial Crisis ◽  
Systemic Risk ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Investment Fund ◽  
The European Union ◽  
Member States ◽  
Fund Managers ◽  
Eu Legislation

This paper deals with the debate on the methods to regulate hedge funds, with a particular focus on direct or indirect regulation. After having briefly examined the pros and the cons of directly regulating these investment schemes, it comes to the conclusion (largely shared by most scholars) that hedge funds should not be directly regulated, while regulation should concern their management companies and, most of all, their counterparts (lenders in the first place) with a view to managing systemic risk. In addition, regulation should also set precise thresholds for access which should aim at protecting unsophisticated investors from hazardous moves, without, however, falling into the trap of regulating hedge fund themselves.The attention is then turned to the European Union and to its Alternative Investment Fund Managers Directive (AIFMD). An analysis is conducted on some of the most significant approaches to hedge fund regulation which have fuelled (and are partly still fuelling) the debate within EU institutions in its struggle to provide Member States with a valid response to the financial crisis, and on some key provisions of the first level AIFMD. In this light the author concludes that, despite the declared intent to regulated fund managers, the directive often seems to regulate hedge fund themselves. This does not seem to be in line with the thoughts of most scholars and market operators on hedge fund regulation and also looks at odds with other pieces of EU legislation (in particular with the so-called “Newcits”).

scholarly journals PENERAPAN PERMODALAN BASEL III DAN IMPLIKASINYA TERHADAP KINERJA PERBANKAN DI INDONESIA

2019 ◽  
Author(s):  
Komang Agus Rudi Indra Laksmana
Keyword(s):  
Financial Crisis ◽  
Impact Analysis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
Banking System ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Negative Effect ◽  
The Global Financial Crisis

The global financial crisis that occurred in 2007/2008 has encouraged state leaders who are membersof the G-20 to declare international efforts aimed at increasing transparency, accountability and regulation ofthe financial sector through strengthening the quantity and quality of the banking sector capital. This was basedon the occurrence of the global financial crisis in 2008, one of which was caused by the excessive level of leveragein the banking system both for the position recorded on the balance sheet (on-balance sheet) and inadministrative accounts (off-balance sheet). The final results of the recommendations are thenissued by Basel III:A global regulatory framework for more resilient banks andbanking systems on December 2010. In general, theBasel III agreement has threemain components, namely capital, liquidity and leverage ratio. The applicationofBasel III capital has an impact that will vary in various countries depending onthe number of exposures affected.This study conducted an impact analysis on theperformance of Basel III capital towards the performance of banksin Indonesiaduring the period of 2018 based on capital adequacy (CAR), and on the liquidity(NSFR, LCR) on growthin profitability (ROA). The study involved 11 banks withthe largest assets in Indonesia in 2018. The results showedthat CAR had asignificant negative effect on ROA, while the NSFR had a significant positiveeffect on ROA,and LCR had a significant negative effect on ROA. This study waslimited in terms of the number of samples anddata used, therefore furtherresearch is expected to increase the amount of data and samples and researchvariables.Keyword: Basel III; CAR; LCR

scholarly journals Performance of Commercai Banks of Pakistan in the backdrop of Global Financial Crisis

2016 ◽  
Vol 11 (1) ◽  
pp. 2624-2633
Author(s):  
Muhammad Salih Memon ◽  
Munawwar Ali Kartio ◽  
Prof Dr Abida Taherani ◽  
Prof Ghulam Hussain Khaskhelly
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Mortgage Market ◽  
Capital Adequacy ◽  
Subprime Mortgage ◽  
Basel Accord ◽  
Before And After ◽  
The Stability ◽  
Control And Management

This research paper highlights the efficiency & performance of commercial banks of Pakistan after the emergence of global financial crisis. The crisis were basically started in United States after the collapse of subprime mortgage market but engulfed the entire globe though the level of severity was different from country to country. Paper also discusses the challenges and obstacles hindered the smooth performance of banking sector in Pakistan. Five big banks of the country were selected to evaluate their efficiency in terms of profits, liquidity and solvency.For this purpose various financial ratios were used to avoid size disparity of banks. The banks play an important role of financial intermediation; channelize savings of public to investors hence basic key performance indicators for this research were deposits, profit, advances and capital.An attempt has been made to examine the growth and sustainability of banks through their performance from 2007 to 2012, before and after crisis.The main findings are (I) the profitability was affected adversely (II) Non Performing Loans were increasedsignificantly after tight control and management for several years.(III) It was explored that costly deposits were mobilized to maintain the book size and restore the confidence of depositors and all stake holders. (IV)The stability of the system remained unquestionable due to maintenance of Capital Adequacy Ratio well above the targeted ratio of 8 % in terms of Basel accord.

scholarly journals Determinants of Egyptian banks profitability before and after financial crisis

2016 ◽  
Vol 14 (1) ◽  
pp. 360-372
Author(s):  
Osama A. El-Ansary ◽  
Mohamed I. Megahed
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Generalized Method Of Moments ◽  
Capital Adequacy ◽  
Return On Equity ◽  
Operating Income ◽  
Explanatory Variables ◽  
Efficient Management ◽  
Before And After

One of the most important instruments of the financial system that reveals the future of the economy in any country is the profitability of the banking sector. Starting from 2008, Egypt was banged by consecutive shocks, both globally and locally, started with global financial crisis in Sep., 2008. The essential objective of the current study is to investigate factors that affect Egyptian banks’ profitability before and after financial crisis using Generalized Method of Moments (GMM) through Eviews. The sample period covers from 2004 to 2013, return on assets and return on equity were used as proxy for banks’ profitability. The explanatory variables which affect profitability are deposits to total assets ratio, operating income to asset ratio, credit quality, capital adequacy, loans rate, equity growth minus loan growth rate, asset share ratio and Egyptian banks’ total assets to Egyptian gross domestic product (GDP).The empirical findings suggested that Egyptian banks with higher capital strength, asset share, and efficient management exhibit higher profitability level, whilst Egyptian banks with higher credit risk and loans intensity exhibit lower profitability level.

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