The Structural Foundations of International Finance
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The Structural Foundations of International Finance

Problems of Growth and Stability

  • New Horizons in International Business series

Edited by Pier Carlo Padoan, Paul A. Brenton and Gavin Boyd

The Structural Foundations of International Finance examines the ways in which national economies, especially those of industrialized countries, are affected by the operations of international financial markets. Although these markets provide productive funding, there is also much speculative trading in stocks and currencies which can cause booms, slumps and hinder recovery. The authors advocate entrepreneurial coordination by productive enterprises for balanced and stable growth, with reduced risks of financial crises and recessions.
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Chapter 5: International banking regulation

Maximilian J.B. Hall and George G. Kaufman

Extract

5. International banking regulation Maximilian J.B. Hall and George G. Kaufman Banks have traditionally been regulated by their domestic or host countries for a wide variety of reasons. In more recent years, as advances in technology and communications have both reduced the cost of banking services across greater distances, including across national boundaries, and increased the demand for such services, banks have both expanded physically (bricks and mortar) across national boundaries and conducted business across such boundaries without a physical presence. In response, many of the same concerns that led governments to regulate domestic banks have given rise to pressures for harmonizing bank regulation among countries. This chapter first reviews and evaluates the historical reasons for domestic bank regulation and the reasons more recently offered for transnational or international regulation. It then discusses both the specific international prudential regulations developed by the Basel Committee on Banking Supervision, which have been adopted by many countries, and the modifications and extensions recently proposed by the Committee. Lastly, the chapter reviews the structure of government-provided or -sponsored deposit insurance in the USA, which both provides a basic justification for government regulation of banks and interacts with such regulation to determine the ultimate effectiveness of the regulations. The chapter concludes by making recommendations on how international regulation should be structured to best achieve efficient, safe and competitive domestic and international banking systems. WHY BANKS ARE REGULATED DOMESTICALLY Banks are regulated because the regulations are perceived to benefit one or more targeted groups. Banks are...

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