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21. Evolve or Perish: The Global Forces Changing the Business of Banks

Author:
Robert Fay and Angelo Arcelli
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Following the 2008 financial crisis, the Group of Twenty embarked on an ambitious financial regulatory reform plan that has seen many banks worldwide make substantial progress in terms of both capitalization and governance. Over this period, banks have also become increasingly exposed to business risks from digitization, artificial intelligence and cybercrime, and major investments are necessary to manage these risks. New regulations have been introduced in the European Union to reduce these risks, but their associated costs have potentially created a lasting competitive disadvantage for European banks. This situation has raised some key questions that deserve to be discussed and investigated: How does regulation — including that outside the sector — affect banks’ ability to compete globally? What will be the impact of fintech players as well as globally active banks from China and other emerging markets? Can the Basel regulatory framework and Financial Stability Board (FSB) ensure a level playing field globally going forward, or has the regulatory pendulum swung too far? How will the supervisory approach need to be adapted to the changing structure of the global financial system? Moreover, how will the implementation of Basel reforms affect the industry? These and other questions remain about the effectiveness of the already-achieved reforms as well as their future direction. These issues were at the core of CIGI and Oliver Wyman’s fifth annual Financial Regulatory Outlook Conference, held in Rome on November 28, 2018. This conference report summarizes the key points of discussions at the conference, with a special focus on the 10 years of regulatory reform that was conducted under the auspices of the FSB and the new forces that are currently affecting banks and could have an impact on the future.
Topic:
Financial Crisis, Regulation, Europe Union, and digital culture
Political Geography:
Europe and Global Focus

22. Emerging Countries in Global Financial Regulatory Standard Setting: What Is to Be Done?

Author:
Andrew Walter
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper explores the role of emerging-country members in the Basel process, a key aspect of the global financial standard-setting process. It argues that this process has been significantly more politically resilient than adjacent aspects of global economic governance, in part because major emerging countries obtain continuing “intra-club” benefits from participation within it. The most important of these are learning benefits, but status and sometimes influence over standard-setting outcomes can also be valuable. The paper outlines how these benefits could be enhanced to secure the ongoing resilience of global financial regulatory governance. It recommends some modest reforms to further improve the position of emerging countries in the process and to bolster its perceived legitimacy among members and non-member countries.
Topic:
Economics, International Trade and Finance, Governance, and Regulation
Political Geography:
Global Focus

23. Policy Note: Dialogues On Sanitation: Legal Perspectives on Sanitation in Urban India

Author:
Scaling City Institutions for India: Sanitation
Publication Date:
03-2019
Content Type:
Policy Brief
Institution:
Centre for Policy Research, India
Abstract:
The event was organised as a part of ‘Dialogues on Sanitation’ series and specifically focused on the legal and regulatory regime pertaining to urban sanitation. The event brought together senior policymakers, city and state level implementers, technocrats, members of the civil society and legal experts to brainstorm towards bettering the regulatory regime on urban sanitation. Several aspects such as the role of law and regulation in Faecal Sludge Management, rights of sanitary workers, and public-private participation in Urban Sanitation were discussed during the course of the workshop.
Topic:
Government, Law, Regulation, Urban, and Sanitation
Political Geography:
South Asia, India, and Asia

24. Synthesis Report on State of Water: A Look at the Legal and Regulatory Framework Governing Water Services across Jurisdictions

Author:
Maanav Kumar and Parag Mohanty
Publication Date:
03-2019
Content Type:
Special Report
Institution:
Centre for Policy Research, India
Abstract:
This study looks at the development of legal and regulatory framework governing drinking water and sanitation services in South Africa, England and United States. Around 780 million worldwide do not have access to clean drinking water and almost 2.5 billion people lack access to improved sanitation according to data published by Centers for Disease Control and Prevention. In such a situation, it becomes extremely important to study the legal and regulatory measures used internationally to control, manage and improve these resources. This study, covering South Africa, England and USA, sets out to identify, comprehend and analyze these legal frameworks and structures; examine the control exercised by national, state/provincial as well as municipal governments over water and sanitation-related questions; and the responsive measures being taken by them to preserve the water resources and their quality for future generations. The authors have observed that in presence of varying geographical, historical and social factors, while it would be impossible to compare each model against the other on the basis of merit, it becomes increasingly important for governments to balance the individual’s right to water with the planet’s ecological balance.
Topic:
Environment, Government, Natural Resources, Water, Law, Regulation, Legislation, and Sanitation
Political Geography:
South Asia, India, Asia, and Global Focus

25. White Paper on Regulating E-Commerce in India: Need for Principles-based Approach

Author:
Ananth Padmanabhan and Arjun Sinha
Publication Date:
03-2019
Content Type:
Special Report
Institution:
Centre for Policy Research, India
Abstract:
E-commerce has come under heavy regulatory intervention in the past few months. From data localisation to mandatory sharing of data, and a catch-all definition of e-commerce itself to regulatory barriers for inventory-based business models in all these sectors, these recent proposals leave limited room for natural evolution through market competition. Pushing back against these proposals, this White Paper argues that a principles-based rather than rule-based approach must be adopted to regulate this sector. This can be operationalised through a four-step process: the first step is to identify critical sectors where a policy is required in the first place; the second requires prioritising concerns that regulation needs to address immediately rather than crystal-gazing; the third is to explore possible models of co-regulation; and the final step is to focus on effective enforcement of the limited number of areas where state intervention through policy would exist because of adherence to the first three steps.
Topic:
Science and Technology, Regulation, Internet, Business, and Trade
Political Geography:
South Asia, India, and Asia

26. Should We Worry About Corporate Leverage?

Author:
Şebnem Kalemli-Özcan
Publication Date:
10-2019
Content Type:
Policy Brief
Institution:
Economics for Inclusive Prosperity (EfIP)
Abstract:
There has been a large increase in corporate leverage in many countries since the early 2000s. Figure 1 plots corporate debt to GDP since 2002 for different groups of countries. With the exception of the U.S., both advanced economies and emerging markets have corporate debt exceeding GDP since 2005. U.S. corporate debt is also on an increasing trend. The fastest growth in corporate debt has been observed in emerging markets. A closer look will reveal that China and other fast growing emerging countries in Asia drive most of the increase in corporate debt for the emerging markets.
Topic:
Debt, Economics, Markets, Regulation, Multinational Corporations, and Economic Policy
Political Geography:
United States and Global Focus

27. The Impact of Business Regulatory Quality on Private Sector Investment in Botswana

Author:
Kedibonye Sekakela
Publication Date:
03-2019
Content Type:
Working Paper
Institution:
Botswana Institute for Development Policy Analysis
Abstract:
A market-friendly regulatory environment is key for private sector investment. In this paper, we examine the impact of business regulatory quality on private sector investment in Botswana. The paper finds that the business regulatory environment stimulates private sector investment in the long term and this phenomenon occurs when the quality of bureaucracy improves, among other factors. Other critical factors affecting private sector investment examined in this paper include; corporate credit, output and public infrastructure investment. Private sector investment responds positively to increases in corporate credit in the short term but not responsive in the long term. Economic activities support private sector investment positively but weak. On the other hand, public infrastructure investment crowds in(out) investment in the short and long term respectively. Policy wise, Botswana should further deepen its efforts towards creating a market-friendly regulatory environment and also consider how business regulatory quality interact with other policy variables for better investment and growth outcomes.
Topic:
Economics, Developing World, Regulation, Business, Investment, and Economic Development
Political Geography:
Africa and Botswana

28. Environmental regulation in a transitional political system: delegation of regulation and perceived corruption in South Africa

Author:
Pedro Naso
Publication Date:
09-2019
Content Type:
Research Paper
Institution:
Centre for International Environmental Studies, The Graduate Institute (IHEID)
Abstract:
I study the economic motivations behind a reduction in the discretionary power of environmental regulators, and the impact that such reduction has on perceived corruption in South Africa. I examine the transition from the Air Pollution Protection Act of 1965 to the Air Quality Act of 2005, a change from full to partial delegation of regulation. By constructing a principal-agent model, I argue that this transition might have occurred because of an increase in the dispersion of rent-seeking motivations of public agents. This happens because, from the principal’s perspective, the possible harm— loose pollution control and misappropriation of environmental fines— generated by corrupt agents is greater than the potential benefits brought by diligent agents. In my empirical analysis, I use diff-indiffs models for a two-period panel with 191 South African firms to show that the regulatory change decreased treated firms’ perceived corruption, but did not improve other institutional quality measures.
Topic:
Climate Change, Economics, Environment, Regulation, and Pollution
Political Geography:
Africa and South Africa

29. Impacts of legal and regulatory institutions on economic development

Author:
Pedro Naso
Publication Date:
12-2019
Content Type:
Research Paper
Institution:
Centre for International Environmental Studies, The Graduate Institute (IHEID)
Abstract:
Since the second half of the 20th century, with the contributions of Coase, Williamson and North, the economic literature has emphasised the role of institutions in explaining differences in economic performance. According to the most diffused view, countries with good institutions will invest more in physical and human capital, will use productive factors in a more efficient way, and will achieve greater income level. But what are good institutions? And how should governments implement them? Answers to these questions have proven to be difficult mainly because of two characteristics of institutions: (i) institutional functioning is complex: the way institutions affect economic agents’ incentives is dependent on these agents’ individual preferences and the way they interact, which are difficult to predict; and (ii) they are context specific – the same institution in different contexts might result in a different economic outcome.
Topic:
Climate Change, Economics, Environment, Regulation, and Economic Policy
Political Geography:
Africa, South Africa, and Sierra Leone

30. Crisis management for euro-area banks in central Europe

Author:
Alexander Lehmann
Publication Date:
11-2019
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The deep involvement of a number of euro-area banking groups in central and southeastern Europe has benefitted the host countries and has strengthened the resilience of those banking groups. But this integration has become less close because of post-financial crisis national rules that require banks to hold more capital at home, or other ring-fencing measures. There is a risk integration might be undermined further by bank resolution planning, which is now gathering pace. Regulators and banks will need to decide between two distinct models for crisis resolution, and this choice will redefine banking networks. Most efficient in terms of preserving capital and the close integration of subsidiary operations would be if the Single Resolution Board – the banking union’s central resolution authority – takes the lead for the entire banking group. However, this will require parent banks to hold the subordinated debts of their subsidiaries. Persistent barriers to intra-group capital mobility – or the option for home or host authorities to impose such restrictions – will ultimately render such schemes unworkable. The second model would involve independent local intervention schemes, which European Union countries outside the banking union are likely to call for. This will require building capacity in local debt markets, and clarifying creditor hierarchies. Exposure to banking risks will ultimately need to be borne by host-country investors. Bail-in capital issued by subsidiaries to their parents cannot be a substitute because it would expose the home country to financial contagion from the host. To sustain cross-border linkages, banking groups and their supervisors will need to make bank recovery plans more credible, and to strengthen cooperation in resolution colleges (platforms that bring together all relevant parties in resolution planning and execution). Within the banking union there is no justification for the various ring-fencing measures that have impeded the flow of capital and liquidity within banking groups.
Topic:
Governance, European Union, Regulation, Banks, and Macroeconomics
Political Geography:
Europe