The Regulation of Megabanks : : Legal frameworks of the USA and EU / / Katarzyna Parchimowicz.

• VerfasserIn: Parchimowicz, Katarzyna,
• Place / Publishing House: London : : Taylor & Francis,, 2023.
• Year of Publication: 2023
• Language: English
• Physical Description: 1 online resource (246 pages)

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.

Table of Contents

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 UNITY1.1. GENERAL SHIFT FROM TRADITIONAL BANKING BUSINESS 1.1.1. Traditional banking and change-driving forces1.1.1.1. Capital and ideological flows that globalized banking1.1.1.2. Information technology and financial innovations1.1.1.3. Political and regulatory adjustments1.1.2. Modern activities of banks1.1.3. Modern ways of funding1.1.4. Risks of modern banking1.1.5. Modern banking business models 1.2. RISE OF THE G-SIBS - DIFFERENCES AT THE OUTSET1.2.1. 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 classification1.4. CHALLENGES AND OPPORTUNITIES FACING G-SIBs - DIFFERENCES IN THE FUTURE? 1.4.1. Big Tech1.4.2. Green revolution 1.4.3. COVID-191.5. SUMMARYChapter 2. G-SIBS AND THE GLOBAL FINANCIAL CRISIS2.1. REGULATION BEFORE THE GFC: REGULATORY LOOPHOLES AND GENERALIZATION2.1.1. Non-existent regulation2.1.2. Overly general regulation2.1.3. Lack of supervisory discretion2.2. G-SIBS' ADJUSTMENTS TO THE GENERAL RULES2.2.1. Size of assets2.2.2. Leverage2.2.3. Capital, losses and raising capital2.2.4. Funding patterns, liquidity and resolution2.2.4.1. Liquidity problems and resolution2.2.4.2. Liquidity supplementation2.2.5. Securitization2.2.5.1. Origination2.2.5.2. Underwriting2.2.6. Contagion 2.3. AUTHORITIES AWAKEN 2.3.1. Ad-hoc help2.3.2. G-SIBs' redemption2.3.3. Regulatory resolutions2.4. 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 level3.1.2.1. USA3.1.2.2. EU3.2. DESIGNATION3.2.1. International level3.2.2. Regional level3.2.2.1. USA3.2.2.2. EU3.3. G-SIB CAPITAL BUFFER3.3.1. International level3.3.2. Regional level3.3.2.1. USA3.3.2.2. EU3.4. G-SIB LEVERAGE RATIO3.4.1. International level3.4.2. Regional level 3.4.2.1. USA3.4.2.2. EU3.5. LARGE EXPOSURE LIMIT3.5.1. International level3.5.2. Regional level3.5.2.1. USA3.5.2.2. EU3.6. RESOLUTION OF G-SIBS AND TLAC3.6.1. International level3.6.2. Regional level3.6.2.1. USA3.6.2.2. EU3.7. PILLAR 2 POWERS3.7.1. International level3.7.2. Regional level3.7.2.1. USA3.7.2.2. EU3.8. SUMMARY Chapter 4 G-SIBS AND SUPERVISORY DISCRETION 4.1. GENERAL THEORY BEHIND SUPERVISORY DISCRETION4.1.1. Discretion as a double-edged sword 4.1.2. Discretion as a way of revealing information4.1.3. Behavioral aspects of discretion 4.2. SUPERVISORY DISCRETION TO ADJUST REGULATION ON G-SIBS 4.2.1. POSITIVE POTENTIAL OF SUPERVISORY DISCRETION4.2.1.1. Adjusting overly general rules4.2.1.2. Breaking up the big banks4.2.1.3. Remedy for 'too low capital requirements, too low leverage ratio'4.2.1.4. Real flexibility for real economy 4.2.1.5. Greener path4.2.2. SUPERVISORY DISCRETION, UNUSED4.2.2.1. International level4.2.2.2. Regional level4.2.2.2.1. USA4.2.2.2.2. EU4.2.3. OBSTACLES FOR THE APPLICATION OF SUPERVISORY DISCRETION4.2.3.1. Uncertainty4.2.3.2. Arbitrariness4.2.3.3. Regulatory capture4.2.4. HOW TO MAKE SUPERVISORY DISCRETION WORK4.2.4.1. Funding, training and compensation of supervisors4.2.4.2. Choice architecture and system of guidelines4.2.4.3. Concept of ultimate decision maker4.2.4.4. Transparency4.2.4.5. Independent checks4.3. SUMMARY CONCLUSION Concluding remarks Perspectives beyond G-SIBs Perspectives beyond the USA and EU.