Global systemically important banks (G-SIBs) are the largest, most complex and, in the event of their potential failure, most threatening banking institutions in the world. The Global Financial Crisis (GFC) was a turning point for G-SIBs, many of which contributed to the outbreak and severity of this downturn. The unfolding of the GFC also revealed flaws and omissions in the legal framework applying to financial entities. In the context of G-SIBs, it clearly demonstrated that the legal regimes, both in the USA and in the EU, grossly ignored the specific character of these institutions and…mehr
Global systemically important banks (G-SIBs) are the largest, most complex and, in the event of their potential failure, most threatening banking institutions in the world. The Global Financial Crisis (GFC) was a turning point for G-SIBs, many of which contributed to the outbreak and severity of this downturn. The unfolding of the GFC also revealed flaws and omissions in the legal framework applying to financial entities. In the context of G-SIBs, it clearly demonstrated that the legal regimes, both in the USA and in the EU, grossly ignored the specific character of these institutions and their systemic importance, complexity, and individualism. As a result of this omission, these megabanks were long treated like any other smaller banking institutions.
Since the GFC, legal systems have changed a lot on both sides of the Atlantic, and global and national lawmakers have adopted new rules applying specifically to G-SIBs to reduce their threat to financial stability. This book explores whether the G-SIB-specific regulatory frameworks are adequately tailored to their individualism in order to prevent them from exploiting overly general rules, as they did during the GFC. Analyzing the specific character and individualism of G-SIBs, in relation to their history, normal functioning, as well as their operations during the GFC, this book discusses transformation of banking systems and the challenges and opportunities G-SIBs face, such as Big Tech competitors, climate-related requirements, and the COVID-19 pandemic.
Taking a multidisciplinary approach which combines financial aspects of operations of G- SIBs and legal analysis, the book describes G-SIB-oriented legal frameworks of the EU and the USA and assesses whether G-SIB individualism is adequately reflected, analyzing trends in supervisory action when it comes to discretion in the G-SIB context, all in order to contribute to the ongoing discussions about international banking law, its problems, and potential remedies to such persistent flaws.
Katarzyna M. Parchimowicz is Assistant Professor at the Academic Excellence Hub - Digital Justice Center (University of Wroclaw, Poland) and Associate Researcher at the European Banking Institute.
Inhaltsangabe
Contents
ACKNOWLEDGMENTS
LIST OF ABBREVIATIONS
INTRODUCTION
Context and rationale
Structure
Methodology and terminology
Limitations
Place in existing literature
Chapter 1. G-SIBs IN THE USA AND IN THE EU - DIVERSITY, NOT UNITY
1.1. GENERAL SHIFT FROM TRADITIONAL BANKING BUSINESS
1.1.1. Traditional banking and change-driving forces
1.1.1.1. Capital and ideological flows that globalized banking
1.1.1.2. Information technology and financial innovations
1.1.1.3. Political and regulatory adjustments
1.1.2. Modern activities of banks
1.1.3. Modern ways of funding
1.1.4. Risks of modern banking
1.1.5. Modern banking business models
1.2. RISE OF THE G-SIBS - DIFFERENCES AT THE OUTSET
1.2.1. Combining and expanding
1.2.2. Growth
1.2.3. Internationalization
1.3. G-SIBS AS AN UN-UNIFORM GROUP - DIFFERENCES NOW
1.3.1. An un-uniform group
1.3.1.1. Activities
1.3.1.2. Funding
1.3.1.3. Risks
1.3.1.4. Legal structure
1.3.1.5. Ownership
1.3.2. Attempts at business model classification
1.4. CHALLENGES AND OPPORTUNITIES FACING G-SIBs - DIFFERENCES IN THE FUTURE?
1.4.1. Big Tech
1.4.2. Green revolution
1.4.3. COVID-19
1.5. SUMMARY
Chapter 2. G-SIBS AND THE GLOBAL FINANCIAL CRISIS
2.1. REGULATION BEFORE THE GFC: REGULATORY LOOPHOLES AND GENERALIZATION
2.1.1. Non-existent regulation
2.1.2. Overly general regulation
2.1.3. Lack of supervisory discretion
2.2. G-SIBS' ADJUSTMENTS TO THE GENERAL RULES
2.2.1. Size of assets
2.2.2. Leverage
2.2.3. Capital, losses and raising capital
2.2.4. Funding patterns, liquidity and resolution
2.2.4.1. Liquidity problems and resolution
2.2.4.2. Liquidity supplementation
2.2.5. Securitization
2.2.5.1. Origination
2.2.5.2. Underwriting
2.2.6. Contagion
2.3. AUTHORITIES AWAKEN
2.3.1. Ad-hoc help
2.3.2. G-SIBs' redemption
2.3.3. Regulatory resolutions
2.4. SUMMARY
Chapter 3. REGULATION OF G-SIBS IN THE USA AND THE EU - OVERLY GENERAL, BUT FIXABLE?
3.1. INSTITUTIONAL SUPERVISORY FRAMEWORK
3.1.1. International level
3.1.2. Regional level
3.1.2.1. USA
3.1.2.2. EU
3.2. DESIGNATION
3.2.1. International level
3.2.2. Regional level
3.2.2.1. USA
3.2.2.2. EU
3.3. G-SIB CAPITAL BUFFER
3.3.1. International level
3.3.2. Regional level
3.3.2.1. USA
3.3.2.2. EU
3.4. G-SIB LEVERAGE RATIO
3.4.1. International level
3.4.2. Regional level
3.4.2.1. USA
3.4.2.2. EU
3.5. LARGE EXPOSURE LIMIT
3.5.1. International level
3.5.2. Regional level
3.5.2.1. USA
3.5.2.2. EU
3.6. RESOLUTION OF G-SIBS AND TLAC
3.6.1. International level
3.6.2. Regional level
3.6.2.1. USA
3.6.2.2. EU
3.7. PILLAR 2 POWERS
3.7.1. International level
3.7.2. Regional level
3.7.2.1. USA
3.7.2.2. EU
3.8. SUMMARY
Chapter 4 G-SIBS AND SUPERVISORY DISCRETION
4.1. GENERAL THEORY BEHIND SUPERVISORY DISCRETION
4.1.1. Discretion as a double-edged sword
4.1.2. Discretion as a way of revealing information
4.1.3. Behavioral aspects of discretion
4.2. SUPERVISORY DISCRETION TO ADJUST REGULATION ON G-SIBS
4.2.1. POSITIVE POTENTIAL OF SUPERVISORY DISCRETION
4.2.1.1. Adjusting overly general rules
4.2.1.2. Breaking up the big banks
4.2.1.3. Remedy for 'too low capital requirements, too low leverage ratio'
4.2.1.4. Real flexibility for real economy
4.2.1.5. Greener path
4.2.2. SUPERVISORY DISCRETION, UNUSED
4.2.2.1. International level
4.2.2.2. Regional level
4.2.2.2.1. USA
4.2.2.2.2. EU
4.2.3. OBSTACLES FOR THE APPLICATION OF SUPERVISORY DISCRETION
4.2.3.1. Uncertainty
4.2.3.2. Arbitrariness
4.2.3.3. Regulatory capture
4.2.4. HOW TO MAKE SUPERVISORY DISCRETION WORK
4.2.4.1. Funding, training and compensation of supervisors
4.2.4.2. Choice architecture and system of guidelines
4.2.4.3. Concept of ultimate decision maker
4.2.4.4. Transparency
4.2.4.5. Independent checks
4.3. SUMMARY
CONCLUSION
Concluding remarks
Perspectives beyond G-SIBs
Perspectives beyond the USA and EU
Contents ACKNOWLEDGMENTS LIST OF ABBREVIATIONS INTRODUCTION Context and rationale Structure Methodology and terminology Limitations Place in existing literature Chapter 1. G-SIBs IN THE USA AND IN THE EU - DIVERSITY, NOT UNITY 1.1. GENERAL SHIFT FROM TRADITIONAL BANKING BUSINESS 1.1.1. Traditional banking and change-driving forces 1.1.1.1. Capital and ideological flows that globalized banking 1.1.1.2. Information technology and financial innovations 1.1.1.3. Political and regulatory adjustments 1.1.2. Modern activities of banks 1.1.3. Modern ways of funding 1.1.4. Risks of modern banking 1.1.5. Modern banking business models 1.2. RISE OF THE G-SIBS - DIFFERENCES AT THE OUTSET 1.2.1. Combining and expanding 1.2.2. Growth 1.2.3. Internationalization 1.3. G-SIBS AS AN UN-UNIFORM GROUP - DIFFERENCES NOW 1.3.1. An un-uniform group 1.3.1.1. Activities 1.3.1.2. Funding 1.3.1.3. Risks 1.3.1.4. Legal structure 1.3.1.5. Ownership 1.3.2. Attempts at business model classification 1.4. CHALLENGES AND OPPORTUNITIES FACING G-SIBs - DIFFERENCES IN THE FUTURE? 1.4.1. Big Tech 1.4.2. Green revolution 1.4.3. COVID-19 1.5. SUMMARY Chapter 2. G-SIBS AND THE GLOBAL FINANCIAL CRISIS 2.1. REGULATION BEFORE THE GFC: REGULATORY LOOPHOLES AND GENERALIZATION 2.1.1. Non-existent regulation 2.1.2. Overly general regulation 2.1.3. Lack of supervisory discretion 2.2. G-SIBS' ADJUSTMENTS TO THE GENERAL RULES 2.2.1. Size of assets 2.2.2. Leverage 2.2.3. Capital, losses and raising capital 2.2.4. Funding patterns, liquidity and resolution 2.2.4.1. Liquidity problems and resolution 2.2.4.2. Liquidity supplementation 2.2.5. Securitization 2.2.5.1. Origination 2.2.5.2. Underwriting 2.2.6. Contagion 2.3. AUTHORITIES AWAKEN 2.3.1. Ad-hoc help 2.3.2. G-SIBs' redemption 2.3.3. Regulatory resolutions 2.4. SUMMARY Chapter 3. REGULATION OF G-SIBS IN THE USA AND THE EU - OVERLY GENERAL, BUT FIXABLE? 3.1. INSTITUTIONAL SUPERVISORY FRAMEWORK 3.1.1. International level 3.1.2. Regional level 3.1.2.1. USA 3.1.2.2. EU 3.2. DESIGNATION 3.2.1. International level 3.2.2. Regional level 3.2.2.1. USA 3.2.2.2. EU 3.3. G-SIB CAPITAL BUFFER 3.3.1. International level 3.3.2. Regional level 3.3.2.1. USA 3.3.2.2. EU 3.4. G-SIB LEVERAGE RATIO 3.4.1. International level 3.4.2. Regional level 3.4.2.1. USA 3.4.2.2. EU 3.5. LARGE EXPOSURE LIMIT 3.5.1. International level 3.5.2. Regional level 3.5.2.1. USA 3.5.2.2. EU 3.6. RESOLUTION OF G-SIBS AND TLAC 3.6.1. International level 3.6.2. Regional level 3.6.2.1. USA 3.6.2.2. EU 3.7. PILLAR 2 POWERS 3.7.1. International level 3.7.2. Regional level 3.7.2.1. USA 3.7.2.2. EU 3.8. SUMMARY Chapter 4 G-SIBS AND SUPERVISORY DISCRETION 4.1. GENERAL THEORY BEHIND SUPERVISORY DISCRETION 4.1.1. Discretion as a double-edged sword 4.1.2. Discretion as a way of revealing information 4.1.3. Behavioral aspects of discretion 4.2. SUPERVISORY DISCRETION TO ADJUST REGULATION ON G-SIBS 4.2.1. POSITIVE POTENTIAL OF SUPERVISORY DISCRETION 4.2.1.1. Adjusting overly general rules 4.2.1.2. Breaking up the big banks 4.2.1.3. Remedy for 'too low capital requirements, too low leverage ratio' 4.2.1.4. Real flexibility for real economy 4.2.1.5. Greener path 4.2.2. SUPERVISORY DISCRETION, UNUSED 4.2.2.1. International level 4.2.2.2. Regional level 4.2.2.2.1. USA 4.2.2.2.2. EU 4.2.3. OBSTACLES FOR THE APPLICATION OF SUPERVISORY DISCRETION 4.2.3.1. Uncertainty 4.2.3.2. Arbitrariness 4.2.3.3. Regulatory capture 4.2.4. HOW TO MAKE SUPERVISORY DISCRETION WORK 4.2.4.1. Funding, training and compensation of supervisors 4.2.4.2. Choice architecture and system of guidelines 4.2.4.3. Concept of ultimate decision maker 4.2.4.4. Transparency 4.2.4.5. Independent checks 4.3. SUMMARY CONCLUSION Concluding remarks Perspectives beyond G-SIBs Perspectives beyond the USA and EU
Chapter 1. G-SIBs IN THE USA AND IN THE EU - DIVERSITY, NOT UNITY
1.1. GENERAL SHIFT FROM TRADITIONAL BANKING BUSINESS
1.1.1. Traditional banking and change-driving forces
1.1.1.1. Capital and ideological flows that globalized banking
1.1.1.2. Information technology and financial innovations
1.1.1.3. Political and regulatory adjustments
1.1.2. Modern activities of banks
1.1.3. Modern ways of funding
1.1.4. Risks of modern banking
1.1.5. Modern banking business models
1.2. RISE OF THE G-SIBS - DIFFERENCES AT THE OUTSET
1.2.1. Combining and expanding
1.2.2. Growth
1.2.3. Internationalization
1.3. G-SIBS AS AN UN-UNIFORM GROUP - DIFFERENCES NOW
1.3.1. An un-uniform group
1.3.1.1. Activities
1.3.1.2. Funding
1.3.1.3. Risks
1.3.1.4. Legal structure
1.3.1.5. Ownership
1.3.2. Attempts at business model classification
1.4. CHALLENGES AND OPPORTUNITIES FACING G-SIBs - DIFFERENCES IN THE FUTURE?
1.4.1. Big Tech
1.4.2. Green revolution
1.4.3. COVID-19
1.5. SUMMARY
Chapter 2. G-SIBS AND THE GLOBAL FINANCIAL CRISIS
2.1. REGULATION BEFORE THE GFC: REGULATORY LOOPHOLES AND GENERALIZATION
2.1.1. Non-existent regulation
2.1.2. Overly general regulation
2.1.3. Lack of supervisory discretion
2.2. G-SIBS' ADJUSTMENTS TO THE GENERAL RULES
2.2.1. Size of assets
2.2.2. Leverage
2.2.3. Capital, losses and raising capital
2.2.4. Funding patterns, liquidity and resolution
2.2.4.1. Liquidity problems and resolution
2.2.4.2. Liquidity supplementation
2.2.5. Securitization
2.2.5.1. Origination
2.2.5.2. Underwriting
2.2.6. Contagion
2.3. AUTHORITIES AWAKEN
2.3.1. Ad-hoc help
2.3.2. G-SIBs' redemption
2.3.3. Regulatory resolutions
2.4. SUMMARY
Chapter 3. REGULATION OF G-SIBS IN THE USA AND THE EU - OVERLY GENERAL, BUT FIXABLE?
3.1. INSTITUTIONAL SUPERVISORY FRAMEWORK
3.1.1. International level
3.1.2. Regional level
3.1.2.1. USA
3.1.2.2. EU
3.2. DESIGNATION
3.2.1. International level
3.2.2. Regional level
3.2.2.1. USA
3.2.2.2. EU
3.3. G-SIB CAPITAL BUFFER
3.3.1. International level
3.3.2. Regional level
3.3.2.1. USA
3.3.2.2. EU
3.4. G-SIB LEVERAGE RATIO
3.4.1. International level
3.4.2. Regional level
3.4.2.1. USA
3.4.2.2. EU
3.5. LARGE EXPOSURE LIMIT
3.5.1. International level
3.5.2. Regional level
3.5.2.1. USA
3.5.2.2. EU
3.6. RESOLUTION OF G-SIBS AND TLAC
3.6.1. International level
3.6.2. Regional level
3.6.2.1. USA
3.6.2.2. EU
3.7. PILLAR 2 POWERS
3.7.1. International level
3.7.2. Regional level
3.7.2.1. USA
3.7.2.2. EU
3.8. SUMMARY
Chapter 4 G-SIBS AND SUPERVISORY DISCRETION
4.1. GENERAL THEORY BEHIND SUPERVISORY DISCRETION
4.1.1. Discretion as a double-edged sword
4.1.2. Discretion as a way of revealing information
4.1.3. Behavioral aspects of discretion
4.2. SUPERVISORY DISCRETION TO ADJUST REGULATION ON G-SIBS
4.2.1. POSITIVE POTENTIAL OF SUPERVISORY DISCRETION
4.2.1.1. Adjusting overly general rules
4.2.1.2. Breaking up the big banks
4.2.1.3. Remedy for 'too low capital requirements, too low leverage ratio'
4.2.1.4. Real flexibility for real economy
4.2.1.5. Greener path
4.2.2. SUPERVISORY DISCRETION, UNUSED
4.2.2.1. International level
4.2.2.2. Regional level
4.2.2.2.1. USA
4.2.2.2.2. EU
4.2.3. OBSTACLES FOR THE APPLICATION OF SUPERVISORY DISCRETION
4.2.3.1. Uncertainty
4.2.3.2. Arbitrariness
4.2.3.3. Regulatory capture
4.2.4. HOW TO MAKE SUPERVISORY DISCRETION WORK
4.2.4.1. Funding, training and compensation of supervisors
4.2.4.2. Choice architecture and system of guidelines
4.2.4.3. Concept of ultimate decision maker
4.2.4.4. Transparency
4.2.4.5. Independent checks
4.3. SUMMARY
CONCLUSION
Concluding remarks
Perspectives beyond G-SIBs
Perspectives beyond the USA and EU
Contents ACKNOWLEDGMENTS LIST OF ABBREVIATIONS INTRODUCTION Context and rationale Structure Methodology and terminology Limitations Place in existing literature Chapter 1. G-SIBs IN THE USA AND IN THE EU - DIVERSITY, NOT UNITY 1.1. GENERAL SHIFT FROM TRADITIONAL BANKING BUSINESS 1.1.1. Traditional banking and change-driving forces 1.1.1.1. Capital and ideological flows that globalized banking 1.1.1.2. Information technology and financial innovations 1.1.1.3. Political and regulatory adjustments 1.1.2. Modern activities of banks 1.1.3. Modern ways of funding 1.1.4. Risks of modern banking 1.1.5. Modern banking business models 1.2. RISE OF THE G-SIBS - DIFFERENCES AT THE OUTSET 1.2.1. Combining and expanding 1.2.2. Growth 1.2.3. Internationalization 1.3. G-SIBS AS AN UN-UNIFORM GROUP - DIFFERENCES NOW 1.3.1. An un-uniform group 1.3.1.1. Activities 1.3.1.2. Funding 1.3.1.3. Risks 1.3.1.4. Legal structure 1.3.1.5. Ownership 1.3.2. Attempts at business model classification 1.4. CHALLENGES AND OPPORTUNITIES FACING G-SIBs - DIFFERENCES IN THE FUTURE? 1.4.1. Big Tech 1.4.2. Green revolution 1.4.3. COVID-19 1.5. SUMMARY Chapter 2. G-SIBS AND THE GLOBAL FINANCIAL CRISIS 2.1. REGULATION BEFORE THE GFC: REGULATORY LOOPHOLES AND GENERALIZATION 2.1.1. Non-existent regulation 2.1.2. Overly general regulation 2.1.3. Lack of supervisory discretion 2.2. G-SIBS' ADJUSTMENTS TO THE GENERAL RULES 2.2.1. Size of assets 2.2.2. Leverage 2.2.3. Capital, losses and raising capital 2.2.4. Funding patterns, liquidity and resolution 2.2.4.1. Liquidity problems and resolution 2.2.4.2. Liquidity supplementation 2.2.5. Securitization 2.2.5.1. Origination 2.2.5.2. Underwriting 2.2.6. Contagion 2.3. AUTHORITIES AWAKEN 2.3.1. Ad-hoc help 2.3.2. G-SIBs' redemption 2.3.3. Regulatory resolutions 2.4. SUMMARY Chapter 3. REGULATION OF G-SIBS IN THE USA AND THE EU - OVERLY GENERAL, BUT FIXABLE? 3.1. INSTITUTIONAL SUPERVISORY FRAMEWORK 3.1.1. International level 3.1.2. Regional level 3.1.2.1. USA 3.1.2.2. EU 3.2. DESIGNATION 3.2.1. International level 3.2.2. Regional level 3.2.2.1. USA 3.2.2.2. EU 3.3. G-SIB CAPITAL BUFFER 3.3.1. International level 3.3.2. Regional level 3.3.2.1. USA 3.3.2.2. EU 3.4. G-SIB LEVERAGE RATIO 3.4.1. International level 3.4.2. Regional level 3.4.2.1. USA 3.4.2.2. EU 3.5. LARGE EXPOSURE LIMIT 3.5.1. International level 3.5.2. Regional level 3.5.2.1. USA 3.5.2.2. EU 3.6. RESOLUTION OF G-SIBS AND TLAC 3.6.1. International level 3.6.2. Regional level 3.6.2.1. USA 3.6.2.2. EU 3.7. PILLAR 2 POWERS 3.7.1. International level 3.7.2. Regional level 3.7.2.1. USA 3.7.2.2. EU 3.8. SUMMARY Chapter 4 G-SIBS AND SUPERVISORY DISCRETION 4.1. GENERAL THEORY BEHIND SUPERVISORY DISCRETION 4.1.1. Discretion as a double-edged sword 4.1.2. Discretion as a way of revealing information 4.1.3. Behavioral aspects of discretion 4.2. SUPERVISORY DISCRETION TO ADJUST REGULATION ON G-SIBS 4.2.1. POSITIVE POTENTIAL OF SUPERVISORY DISCRETION 4.2.1.1. Adjusting overly general rules 4.2.1.2. Breaking up the big banks 4.2.1.3. Remedy for 'too low capital requirements, too low leverage ratio' 4.2.1.4. Real flexibility for real economy 4.2.1.5. Greener path 4.2.2. SUPERVISORY DISCRETION, UNUSED 4.2.2.1. International level 4.2.2.2. Regional level 4.2.2.2.1. USA 4.2.2.2.2. EU 4.2.3. OBSTACLES FOR THE APPLICATION OF SUPERVISORY DISCRETION 4.2.3.1. Uncertainty 4.2.3.2. Arbitrariness 4.2.3.3. Regulatory capture 4.2.4. HOW TO MAKE SUPERVISORY DISCRETION WORK 4.2.4.1. Funding, training and compensation of supervisors 4.2.4.2. Choice architecture and system of guidelines 4.2.4.3. Concept of ultimate decision maker 4.2.4.4. Transparency 4.2.4.5. Independent checks 4.3. SUMMARY CONCLUSION Concluding remarks Perspectives beyond G-SIBs Perspectives beyond the USA and EU
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