Balancing Regulatory and Economic Interests

Having considered the need for an assessment of benefits and risks to be derived from an evaluation of economic and environmental interests, this section focuses on the equally important need for assessment of regulatory and economic considerations. This being exemplified by the continued involved of leading nations in Basel III regulations – as well as forthcoming Basel IV negotiations.

Credit Risk Measurement, Leverage Ratios, and Basel III

The Basel III Leverage Ratio, as originally agreed upon in December 2010, has recently undergone revisions and updates – both in relation to those proposed by the Basel Committee on Banking Supervision – as well as proposals introduced in the United States. Whilst recent proposals have been introduced by the Basel Committee to improve, particularly, the denominator component of the Leverage Ratio, new requirements have been introduced in the U.S to upgrade and increase these ratios, and it is those updates which relate to the Basel III Supplementary Leverage Ratio that have primarily generated a lot of interests. This is attributed not only to concerns that many subsidiaries of US Bank Holding Companies (BHCs) will find it cumbersome to meet such requirements, but also to potential or possible increases in regulatory capital arbitrage: a phenomenon which plagued the era of the original 1988 Basel Capital Accord and which also partially provided impetus for the introduction of Basel II. This paper is aimed at providing an analysis of the recent updates which have taken place in respect of the Basel III Leverage Ratio and the Basel III Supplementary Leverage Ratio – both in respect of recent amendments introduced by the Basel Committee and proposals introduced in the United States. As well as highlighting and addressing gaps which exist in the literature relating to liquidity risks, corporate governance and information asymmetries, by way of reference to pre-dominant based dispersed ownership systems and structures, as well as concentrated ownership systems and structures, this paper will also consider the consequences – as well as the impact - which the U.S Leverage ratios could have on Basel III. There are ongoing debates in relation to revision by the Basel Committee, as well as the most recent U.S proposals to update Basel III Leverage ratios and whilst these revisions have been welcomed to a large extent, in view of the need to address Tier One capital requirements and exposure criteria, there is every likelihood, indication, as well as tendency that many global systemically important banks (GSIBS), and particularly their subsidiaries, will resort to capital arbitrage. What is likely to be the impact of the recent proposals in the U.S.? The recent U.S proposals are certainly very encouraging and should also serve as impetus for other jurisdictions to adopt a pro-active approach – particularly where existing ratios or standards appear to be inadequate. This paper also adopts the approach of evaluating the causes and consequences of the most recent updates by the Basel Committee, as well as those revisions which have taken place in the U.S, by attempting to balance the merits of the respective legislative updates and proposals. The value of adopting leverage ratios as a supplementary regulatory tool will also be illustrated by way of reference to the impact of the recent legislative changes on risk taking activities, as well as the need to also supplement capital adequacy requirements with the Basel Leverage ratios and the Basel liquidity standards.

Achieving Competitively Cooperative Economic and Trade Relations

This chapter aims to highlight how trade relations can be improved and fostered through an effective symbiotic relationship which does not leave the other trading partner feeling exploited or having executed a bad deal. Free trade agreements are intended to be beneficial to parties involved – when negotiated with relevant and necessary skills – as provided for in terms and conditions within such agreements. Lessons from trading and economic relationships may also serve as a stark reminder than regional alliances and allies will always be beneficial than economic alliances.

More of a Competitor Than a Trade Partner?

As well as considering the rationale for the Trans-Pacific Partnership, and the reason for the withdrawal of the United States, this chapter seeks to consolidate on the wage and unemployment argument that the problem is a shortfall in demand. Further, the chapter seeks to address questions such as whether downward wage rigidity constitutes a problem.

Strategic Economies and Alliances and Their Impact on Economic Outcomes

Two world wars, several revolutions, as well as global economic recessions and financial crises have resulted in present alliances – which could possibly not have otherwise been anticipated or predicted. This chapter highlights major alliances that have arisen over the decades – both economically, regionally and for purposes of security and defense. In recent years, the United States has undertaken a policing role – a role which it has performed brilliantly well – albeit with unnecessary and undue burden left on its shoulders by other allies. This being reflected in its trade and budget deficits – not only consequential from its involvement in the Iraq War (the Middle East), but also its NATO contributions. Security and defense also played a huge role in the outcome of the 2016 Presidential elections – with the eventual realization that depleted resources, the emergence of very powerful allies with sophisticated weaponry and facilities, did not justify the defense of previously and currently existing “policing obligations.”

Free Trade and Trade Protectionism

Does a Trump era signify closer US-UK ties – particularly in view of the developments which heralded the era of such administrations – namely, a revolution against “the traditional establishment”? This chapter highlights what challenges exist for present trade relations – as well as the rationale behind the decisions of certain governments to dispel with previous precedents which were set by their predecessors.

Capital Requirements Directive (CRD) IV

Capital requirement directives – as well as their significance in matters relating to implementation – in the European Union in particular, as well as other parts of the globe, are considered under this chapter. The chapter also aims to accentuate the importance of such directives in matters relating to global and financial stability.

Liquidity Risk Challenges to Regulators in Prudential Supervision

Basel regulations have evolved a long way – since their initial introduction under the 1988 Basel Capital Accord. With liquidity risks and leverage ratios now constituting additional focal points for regulators, issues relating to calibration need to be addressed. This section elaborates on the factors and rationale behind liquidity measures, present initiatives being undertaken to address such measures - as well recommendations aimed at enhancing such liquidity measures.

Liquidity Risk Measurement, Standards, and Monitoring

Liquidity ratios – as well as Basel III leverage ratios were not only consequence of the recent global financial crises – having been introduced under Basel III in 2010, but serve as complements, rather than substitutes, to a risk based capital adequacy framework whose deficiencies were brought to light during the recent financial crisis. This chapter considers and highlights the need for such vital complements – as well as challenges which may still necessitate further revisions to such ratios.

Facilitating Trade and Global Financial Stability

In attempting to address uncertainties presented by the global economic climate through the era of possible shifting diplomatic relations – as well as changes in fiscal, monetary and foreign policies, this chapter seeks to highlight how amicable trade relations can still be facilitated as a means of preserving global financial stability. In so doing, it contributes to the extant literature on the topic by introducing innovative means of addressing current research problems and emerging areas of research – as well as highlighting those areas which currently constitute focal points of study.