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What is the Global Financial System

the global financial system consist of the global international monetary system with its official
understandings, agreements, conventions and institutions as well as the private and official
processes, institutions and convention associated with private financial activities.
What are its components?
The global financial system has three components: the private sector institutions, the nations that
have supervisory jurisdiction over the private institutions and the international institutions through
which the national authorities coordinate and cooperate.
What is the Global Financial Architecture?
The global financial architecture is the collective governance arrangements at the global level for
safeguarding the effective functioning (or the stability) of the global financial system. It is governed
by international financial organisations composed by countries that have agreed to be part of them
What is the global financial regulation?
The global financial regulation consists of international financial standards elaborated at the global
level and widely accepted as good principles, practices or guidelines in a given area.
Which are the main justifications for international financial regulation?
The basic economic rationale is the possible existence of externalities generated by financial
markets activity which can't be easily addressed by private sector.
What are the historical reasons for international financial regulation?/What are the lacks of
global financial regulatory system before the global crisis?
The reasons arose after the 1980s and were: 1) increasing of globalised capital markets; 2) easier
cross-border financial flows; 3) changing channels of financial intermediation due to new forms of
unregulated investments (hedge funds, private equity); 4) birth of a few dominant institutions in
global capital markets (Citigroup, HSBC and New York Stock Exchange); 5) existence of small
number of dominant marketplaces; 6) growth of concentration in financial industries; 7) increased
multipolarity of the global economy.
What are the lacks of global financial regulatory system before the global crisis?
What is the economic theory at the base of the need for international financial regulation?
The main approach is the risk-based supervision approach. It is a structured process aimed at
identifying the most critical risks that face each subject and through a focused review by the
supervisor to assess the subject's management of those risks and the subject's financial vulnerability
to potential adverse experience.
What is the definition of financial regulation?
Financial regulation is the process of authorising, regulating and supervising financial institutions
and markets.
Which are the main regulatory areas at the international level?
Main regulatory fields cover: 1)accounting standards; 2) bank capital requirements; 3) money
laundering; 4) investor protection.
What degree of regulation should there be?
The range of regulation to set is justified when it is able to reach a suitable trade-off between the
two extremes of rigid state control of financial system (full regulating) and no regulatory
intervention at all (free market).

the enforcement of prudential standards is usually cheaper than the potential intervention of the lender of last resort. Should the prudential regulation and supervision be different between different countries? Globalised financial markets and cross-border financial institutions require that prudential requirement are standardised and common What is the regulatory competition? It is a phenomenon in law economics and politics concerning the desire of law makers to compete with one another to attract businesses or other actors to operate in their jurisdiction. there is a rationale for regulatory intervention when the benefits exceed the costs that this intervention imposes on financial institutions and markets. lost reputation. What is the domino effect? Is the contagion resulting from the banks' special position in the payments network due to their role in maturity transformation and liquidity provision. Furthermore. sometimes avoiding prudential standards set by international standard setting bodies that distract businesses. It is the cost to the economy arising from domino effect which cannot be easily internalized. which can be calculated in terms of lost jobs. 2)cost of lender of last resort: the potential cost suffered by the lender of last resort when a domino effect arise from a bank failure. which increase information flows to supervisors by a continuous dialogue with managers and controllers. which reduce institutions vulnerability to shocks. What are the tool to establish the adequate nature of financial regulation? ???? What are main risks in global financial markets? Main risks are the systemic risk and the information asymmetries risk. Which are the prudential standards related to the domino effect costs? The existence of externalities justifies the enforcement of larger reserves to take account of potential external cos to the economy if the bank fails. What is the regulatory Arbitrage? It is the race between countries to the strongest regulatory framework.Which are the criteria forming the base of the choice about the degree of regulation? In principle. For information asymmetries risk we need conduct of business rules directed to investor protection. 2) Liquidity requirements. and lost of shareholders value. Which are the kinds of prudential standards? 1)Capital requirements. Which are the costs connected to domino effect? 1)cost of externalities. What are the issues in the use of such criteria? The main issues regard the cost-benefit analysis which is not usually easy to be done since costs are usually quantifiable earlier and easier than benefits. . 3) Adequate management and control frameworks. which provide a cushion against loss and increase market confidence. Which are the appropriate kind of intervention to face each risk? For systemic risk we need prudential standards designed to safeguard solvency of intermediaries.

What is the better regulation principle? Is a method of policy making aiming at preventing rules from failing to meet the target accurately or unacceptable cost and which estimates ex-ante the impact of new rules. then there is an impact analysis. a consultation. What dimension the information asymmetries regulation should have? Conduct of business rule must be common and stadardised at the international level to avoid that financial firms can evade domestic rules through foreign subsidiaries. more transparency in investment and savings market and prudential supervision of issuing firms. After the implementation there is an ex-post assessment. Ultimately. What is the meaning of supervision Activity? The supervision activity consists of the monitoring and enforcing activities. Which criteria could be adopted to overcome the conflict between regulation and competition? Usually. each country undertakes evaluations referring to reasonable prudential standards and denies the access when foreign intermediaries are below this level. but there is a tendence towards the centralization by the creation of an international financial standards regime. What is the meaning of regulation activity? It is the multilateral activity or rule making at the global level for safeguarding the effective functioning of the global financial system. should know the long term benefits of creative destruction. Which are the kinds of conduct of business rules? There are rules against the abuse of insider trading information and rules directed to ensure financial soundness of intermediaries and issuing companies such as: rating agencies. what is the dimension of regulation? Regulation is de-centralized. the final proposal and the implementation. What degree should the financial regulation have in the name of financial stability? Regulation in the name of financial stability is justified only when a singular phenomenon of crisis (of a financial institution or in the price markets) could have damaging consequences for the sector as a whole (confidence loss) Which are the criteria for regulatory intervention in the name of financial stability? To decide a regulatory intervention in the name of financial stability regulators should have regard to the interests of the financial system as a whole. At the international level. it is necessary for regulators to find a correct balance between regulation in the name of financial stability and freedom left to financial markets and institutions. It starts from a proposal planning. . Notice that the consultation phase takes place at all stages of the regulatory process.Which is the kind of financial regulation more appropriate to face the information asymmetries risk? Conduct of business rules Which are the kinds of information asymmetries? Types of information asymmetries can be related to the economic state of companies or they can manifest themselves as difficulty for the investor to understand the terms of investment contract stipulated by an intermediary. should be cautious in fixing limits and aims of regulatory intervention.

on the other. and system-wide financial imbalances with sufficient clarity and rigor to persuade policymakers to take remedial action. Which were the features of pre-crisis GFR? The global financial institutions were regulated within the perimeter of all five lines of defense. Which are the sources of systemic risk in the global financial system? 1)global financial institutions (large and international banks/groups but also including global investment banks and insurance companies). Give some example of this link development of modern banking regulation and supervision after the 1929 crisis. it was largely voluntary and therefore slow to act. poor incentive structures. Instead. 2) consequent difficulty in identifying correct answers to the macro-trends that led to the crisis. 2)financial regulation. opaque instruments and exposure. 4) weak links between macroeconomic policy makers in finance ministries and central banks on one hand and regulators. Which are the weakness of pre-crisis global financial architecture? 1) piecemeal architecture of the system due to the existence of a highly complex network of financial supervisors overseeing and regulating different parts of the financial markets. creation of the stability forum after the Asian crisi of 1999. 3)macroeconomic policies contribute to conditions conducive to financial crisis. 5)pre-crisis central bank and finance ministry tools for addressing liquidity/solvency issues and for restoring market trust and confidence proved to be inadequate. reform of GFA following the crisi of 2088-2009. 4)national and global markets surveillance failed to identify the buildup of institutional. what is the dimension of supervision? Supervision is decentralized. 3)serious accountability gap within regulatory institutions structure. 2)official supervision failed to promote the safety and soundness of systematically important financial institutions. it was very complex. market. creation of the Basel committee after the Herstatt affair in 1974.At the international level. What is the link between financial law and financial crises? The outbreak of global financial crisis was the father of financial laws. 5)crisis management and resolution. Which are the regulatory tools to face these sources of systemic risk? 1)market discipline (including private risk management and governance along with adequate disclosure of informations via financial reporting and market transparency). global financial markets are indirectly regulated. insufficent exante market discipline and loss of trust. Unregulated financial market activities are neither rugulated nor supervised. Which were the features of pre-crisis global financial architecture? It was dominated by G7. in the sense that there is a surveillance through private international networks and business cooperation agreements and the informations are shared by central banks and supervisory and regulatory authorities. with consequent difficulties for cooperation. insufficient capital and liquidity buffers and excessive leverage. 3) unregulated financial market activities of institutional investors. 3)microprudential supervision of financial institutions and products. Which were the weakness of pre-crisis GFR? 1)private risk management and market discipline failed and market disfunctioned due to imperfect information. 4)macroprudential supervision of markets and the financial system as a whole. . it was lacking in an organization with the leadership. eak central coordination of regulation of the single financial market. 2) global financial markets. inadequate governance by top management. 5) specifically for Eu.

Who are the actors involved in the global financial regulatory process? The G20. Who are the international organisations involved in improving initiatives? 1) G20. a variety of initiatives were taken at the international leve with a view toward reforming the global financial architecture and enhancing and supplementing the existing IFSs in order to eliminate dangerous gaps in the supervision and regulation of international financial markets. BIS. What is the legal meaning of the word legitimacy? Legitimacy of an international financial standard setting body means membership. BCBS. the improving initiative ex ante are mainly of preventive nature as their aim is to make the international financial system more crisis resistant. . Measures taken ex post look to improve cross border crisis resistant management and establish early warning system. IAIS.. 2) formal government institutions like OECD. Which are the fundamental activities of the international financial organizations within the global financial regulation process? The international financial architecture is composed of the various institutions that produce. 4)Regulator institutions like FSB.WB . the standard setting bodies and the national jurisdiction.. IASB. What is the nature of the improving initiatives? The nature of the improving initiatives can be ex ante or ex post. the reformed IMF and the Financial Stability Board.IMF. IOSCO. Which are the improving initiates taken at the international level? After the domestic subprime crisis. 5)Professional trade associations like IADI... What is the legal meaning of the word capacity? Capacity stand for mandate of the IFSs. the IMF. FATF . 2)UN commission of experts. G8. implement and assess the implementation of international financial standards How can the international financial organization be grouped in relation to their nature and their composition? The international institutions can be divided in five groups: 1)informal government institutions like G7. 3) central banks institutions like G10. What is the meaning of legal status? Legal status stands for authority... G20. What are the main international organisations included in the global financial regulation and which is their specific role? The reformed international architecture following 2009 restructure is based on the G20. What is the legal meaning of the word authority? Authority stands for Legal Status. 3)Group of thirty. the FSB. joint forum.Which are the crisis policy implications for the global financial regulatory system? The main policy implications are the need to reform the international regulatory structure in order to act in a global and parallel manner in the different sectors of financial system and the the need to reform financial regulation alongside the rapid evolution of financial markets. CPMI.

Why are the international financial standards important? The development and implementation of internationally accepted economic. 2)Financial Sector regulation and supervision including banking supervision. which is a key of sound financial systems and deserve the priority of implementation. greater transparency and more efficient and robust institutions. banking.. monetary and financial policy transparency. insolvency and creditor rights. fiscal transparency. the FSB oversee and coordinate the standard setting process. Committee on the Global Financial System. capital adequacy. accounting disclosure and transparency. securities. practices. What is the FSB's compendium of international financial standards? The compendium of international financial standards is a set of 12 standard areas highlighted by the financial stability board. 3) market integrity covering corporate governance. More specifically they strengthen domestic financial system by encouraging sound regulation and supervision. the standard setting bodies are involved in the elaboration of IFSs... anti money laundering and combating the financial terrorism. Why have they this legal nature? the international standard setting bodies are not based on an international treaty and they have no . improving market integrity and reducing the risks of financial distress and contagion. insurance and functional.What is the specific role of each of them? The IMF role is the surveillance and implementation of IFSs. supervision. accounting. which cover areas within sectors. the national jurisdiction incorporate the IFSs in domestic regulation and practice. payment systems. Which are the groups including the international financial standards identified by the financial stability board? Financial stability board has highlighted three areas: 1) policy transparency which include data transparency. the G20 has the overall political guidance. this is because the IFSs have no legally binding power on their own What are the contents of the international financial standards? Standards take the form of recommendations widely accepted as good principles. How can the international financial standards be classified? Standards may be classified by their nature or their scope. methodologies/guidelines in order of degree of specificity. Moreover. insurance. securities. they promote international financial stability by facilitating better informed lending and investment decisions.. 2)classification by their nature is divided in principles. such as governance. markets and infrastructures. financial and statistical standards can hel promote sound domestic financial systems and international financial stability. 1)classification by their scope is divided in sectorial standards which cover each sector such as government and central bank. Who are the international standard setting bodies? BCBS. auditing. Committee on Payment and Settlement System. Which is the weakest link in the global regulatory process and why? The weakest link is the implementation of IFSs at national level.. What is the legal nature of international financial standards? The standards have the nature of soft laws. practices or guidelines in a given area.

Is the G20 a formal international organization? The G20 is a informal government institution. the organization for economic cooperation and development. What are the market and official incentives to promote their implementation at the national level? Peer pressure. Which are the features of its internal organization? The G20 has no seat. When was the G20 group created? The G20 was created in 1999. nor authority. Spain and Switzerland. Singapore. . its organisation and infrastructure must be change. nor any permanent staff and it functions on the basis of rotating chair. Why should they be included? To male the international financial architecture more consistent. What are the reasons of its creation? It was create in response to both the financial crisis that arose in a number of emerging economies in the 1990's and a growing recognition that some of these countries were not adequately represented in global economic discussion and governance. like FSAPs. Hong Kong. the world bank on a permanent basis. ROSCs and peer pressure. Which are the countries excluded from its current composition? Netherlands. It is a permanent organization? It would become a permanent organization but to do so. the international labour organization. the financial stability board. both official. the united personality. When has the G20 group become relevant in sponsoring the international standard setting process? At the Washington and London summits of 2008 and 2009 the leaders of the G20 acknowledge their will to reform the financial regulation at the global level and to take whatever action was necessary to do so. or market incentives. Which are the international organizations invited to relevant G20 meetings? The international monetary fund on a permanent basis. What are the issues linked to its current organization? The G20 has no formal legitimacy or competence to impose rules on its participants or on other countries institution. Which are the countries in the G20 membership? The forum brings together 20 world's major advanced and emerging economies. What are the legal tools to make them compulsory? Their implementation is encouraged by a number of incentives. blacklisting. peer assessment. the world trade organization.

Each state is represented on a 24-members executive board. Which are the key principles to guide global financial regulation identified during St. . What are the reforming areas identified in the action plan? 1)Strengthen transparency and accountability by enhancing disclosure of complex financial products and ensuring complete and accurate disclosure by firms of their financial conditions. Petersburg summit? 1) Inclusion: global debates and inclusion of small or poor countries. All members appoint a governor of the IMF's board of governors. products or participants are regulated or subject to oversight. preventing illegal market manipulation and fraudolent activities and abuse. 3)promoting integrity in financial markets by increment in investor and consumer protection. What is its legal status? Formal governmental institution based on Articles of Agreement.What is the G20 current mandate? The aims of the G20 are the policy coordination between its members in order to achieve global economic stability. What are the aims of the Washington summit action plan? The main aims were to restore global growth. 4)reinforcing international cooperation. 3)Simple rules. 5)Scope: the scope of regulation need constantly to be reshaped. When was it formally organised? December 1945. Where are its headquarters? Washington. the sustainable growth. How many countries are included in the international monetary found membership? The members of the IMF are 186 of UN members. facilitate international trade. avoiding conflicts of interests. prudential oversight and risk management. 5)reform international financial institutions. to strengthen the international financial system and to reform international financial institutions. 2)Not one size fits all: establish a level playing field with harmonized international standards but national discretion will be necessary in other areas. promote high employment and sustainable economic growth. Make regulatory regimes more effective over the economic cycle. 6)Coherence: to the new financial regulation. What is the representativeness of each included country? finance ministers and governors of central banks. secure financial stability. Ensuring that all financial markets. plus Kosovo and republic of south Sudan. During which formal meeting was conceived? Bretton Woods. 2)enhancing sound regulation by strengthening regulatory regimes. What is the IMF mandate? Aims of the international monetary fund are to foster global monetary cooperation. 4)Transparency. to promote financial regulation that reduces risks and prevent future financial crisis and to create a new international financial architecture. When was the IMF conceived? July 1944. promoting information sharing.

fiscal policies and management. 2)more flexible stand-by arrangements as crisis prevention tools. The lending activity was enhanced in order to address the underlying causes of countries' balance of payments financing needs. They also increase the funds available to the IMF in order to contain the spreading of the crisis to emerging and developing countries. how has the IMF mandate been reformed? The IMF reform of mandate was focused on the IMF role in the new reformed international financial architecture. compilation and dissemination of statistics. 2)preparing a synthesis of the world economic outlook and global financial stability report. 6)elimination of structural performance criteria. What is the substance of the IMF surveillance and lending activity reform? Since 2009 the IMF has undertaken a review of its surveillance mandate including: 1)undertaking a new early warning exercise and vulnerability exercise for advanced economies. 2)assistance and training. 5)leveraging cross-country experience by preparing cross-country thematic reports theat draw policy lessons for other member nations facing similar problems. the IMF uses the financial sector assessment program and the report on the observance of standards and codes. What are the legal tools to carry out his mandate to foster financial stability? To ensure stability of international monetary and financial system the tools are: 1)surveillance. 3)integrating financial stability assessment program for the 25 most important financial system.reduce poverty. which consists in monitoring and discussing countries economic policies in order to assess individual policy impact and encourage adoption of more sound policies. What is the IMF new role in the global financial regulation process? The IMF and the WB promote resilient financial systems around the world through the financial sector assessment program and the report on the observance of standards and code. the G20 enhance the representation of emerging market economies through a revision of quotas. in particular: 1)introduction of a new high access crisis prevention instrument (flexible credit line). banking and financial supervision and regulation. What are the aims of the IMF reforms? The IMF leaders committed to reform IMF from two sides: governance and mandate. 3)Lending. how has the IMF governance been reformed? The IMF is a quota based organisation. After the global financial crisis. . particularly in connection with the elaboration and implementation of international financial standards. What is the rationale for the IMF reforms? The rationale was to reflect changes the world economy and the new challenges in globalization and to give emerging and developing economies greater voice and representation. in order to modernise the IMF. 5)ensure conditions sufficiently tailored to the circumstances. 4)doubling of access limits with revised changes fees and maturities. 4)preparing on a trial basis. 4)Research and Data. After the global financial crisis. offered in 4 areas: monetary and financial policies. at the London summit. therefore. What are the IMF legal instruments to spread an international standard regime worldwide? Together with the WB. dedicated reports of the policies of the most systematically important economies. 3)new lending instruments including increased concessionality and temporary interest relief.

and macro economic expertise. the assessment did not always identify all sources of risk. How are the international financial trying to solve that problem to improve the efficiency of the assessment? One first solution is that all the members of the IMF are committed themselves to undertake FSAP and to support the transparent assessment of their nation regulatory system. Is country participation to FSAPs compulsory? Participation in a FSAP is voluntary. financial sector. Are the outcomes of the FSAPs publicly available? Most countries have made them publicly available. auditing and accounting. . 2)financial sector regulation and superviosion. What is the aim of the assessment made by the ROSCs? ROSC is an assessment of countries compliance to standards and core principles on data dissemination. tailored to country needs. The G20 countries hold a very substantial majority of the vote in the Executive Board and General Meeting of the IMF. 3)More flexible modular assessment. corporate governance. universal membership. codes and principles. What are the weakness of the FSAP highlighted by the global financial crisis? The financial crisis of 2008 has highlighted some weakness of the program: the voluntary nature of the program implying that countries might have benefited from an in depth examination of their financial sectors had not undergone a FSAP. G20 and FSB regulated? The G20 has taken the lead in the overall reform and oversight of the international financial architecture. What is the main problem connected to the assessments made by the FSAP and ROSC? The problem is that both are voluntary. insolvency and creditor rights systems. What is the IMF role in the global financial system? The IMF. When was the WB founded? 1944 at the Bretton Wood conference. where risks where identify by the FSAP. How has the FSAP been reformed? On September 2009 the IMF and the WB have reformed the program to include the following features: 1)more candid and transparent assessments. as an institution with macro-financial supervision. was invited to take a leading role in drawing lessons from the current crisis. although not all of the IMF members are represented by the G20. 3)standards concerned with market integrity. How are the relationships between the IMF. including three basics groups: 1)transparency standards.What is the aim of the assessment made by the FSAPs? Main goal of FSAPs is to identify gaps in international financial architecture and regulation in support of crisis prevention. What are the benchmark of the assessment made by ROSCs? The ROSCs are prepared with regards to a list of internationally recognised standard. consistent with its mandate and to conduct early warning exercise in cooperation with the FSB. fiscal transparency. the warnings where no loud and clear. 2) Improved analytcal Toolkit. 4)better targeting of standards assessments.

improving the functioning of financial markets. broadened mandate. mandatory reports to G20. What was the representativeness of each included country? Finance ministers. improving coordination and information exchange among financial stability authorities. early warning exercise with IMF.Which are the international organizations comprised in the WB? IMF and FSB are other members of the WB. supervisory agencies for financial stability. stronger institutional basis. identifying and overseeing actions to face these vulnerabilities. central bankers. What are the FSF reforms promoted by the G20? Expanded membership. When was the FSF established? 1999 Which were the countries promoting its creation? G7 countries What was its legal status? Regulators' institution. . What were the legal tools to carry out its mandate to foster financial stability? Assessing vulnerabilities affecting the international system. Where was established its secreteriat? Basel How many countries were included int the FSF memberships? G7 + Honk Kong. promoting foreign investment and international trade. reducing the tendency for financial shocks to propagate from country to country. How has the FSF membership been expended? It has included all G20 countries and the European commission. Netherlands. facilitating capital investment. What is the representativeness of each included country? Ministers of finance or minister of development. How many countries are included in WB membership? 188. sustaining development. What was the financial stability forum mandate? Promoting international financial stability. Where are its headquarters? The WB is based in Washington as the IMF. Australia and Switzerland. enhanced capacity. Singapore. What is its legal status? It is a formal governmental institution. What is the WB mandate? Reducing poverty.

the inclusion of emerging countries among many standard setting bodies have contributed to raise the legitimacy of FSB. What where the reasons of FSF legitimacy. What was the main tool for the previous FSF to promote the spreading of the IFSs? The FSF compiled a compendium of existing international prudential standards. the head of the main supervisory agency. What are FSB mandate reforms? To address vulnerabilities: assessing vulnerabilities affecting the financial system. promoting coordination and information exchange among authorities responsible for financial stability. maintain the openness and transparency of financial sector. capacity and authority issues? Its membership was too narrow and the representation of developing countries was very limited which created a legitimacy problem. undertaking joint strategic reviews of the policy development work of the international standard setting bodies to ensure their work is timely coordinated. early warning exercise with the IMF. What are the new FSB member's commitments? Pursue the maintenance of financial stability. from which it identified 12 key standards to be promoted worldwide. deputy of finance minister. Where did the need for an international financial standard regime arise from? The principal rationale for the construction of an international standards regime was the 1997-1998 global financial crisis. What are the FSB' new mechanisms to solve the FSF' authority problem? Increased authorities arises from the assigment of more effective mechanisms for encouraging . using among other evidence of the IMF and WB public FSAP reports. take part in implementation monitoring of agreed commitments standards and policy recommendations. 2)assignment of new mechanisms to encourage compliance with IFSs which gives to FSF more political authority.Who are the countries representatives included in the FSB? Central bank governors or immediate deputy. What are the FSB instruments to solve the FSF' legitimacy problem? Increased legitimacy arise from the extension of FSB membership from the G7 to the G20 countries and the European commission. implement international financial standards (12 international standards and codes). 3)a stronger capacity to tackle macroprudential issues which gives more capacity to the new FSB than the previous FSF. undergo periodic peer reviews. identifying and overseeing corresponding actions. What is the aim of financial stability reforms? To strength the role of promoter of construction of an international standards regime and to improve compliance with international standards. Moreover. The authority problem comes from the fact that it was only an informal forum and it had not any effective mechanism for encouraging compliance with international standards. monitoring and advising on market developments and their implications for regulatory processes. The capacity issue comes from the fact that the FSF had not regulation or supervision powers. Which are the features of the new FSB that can help to overcome the weakness of the previous FSF? Three features of the new FSB will help it overcome some issues of the FSF' weaknesses: 1)a larger membership to solve the legitimacy issue.

2)the strategic place of finance in domestic political economies makes any serious delegation of power to a global regulator very unlikely. WB and WTO? It could not assume the role of financial global regulator for the following reasons: 1)the financial stability board is a very different kind of pillar than other institutions such as IMF.compliance with international standards. advises caution against fraudolent schemes. organize research and statistics seminars and workshop. 4)the development by the FSB of a toolbox of measures to promote adherence to prudential standards and cooperation with non-cooperative jurisdiction. Could the FSB assume the role of a new fourth pillar together with the IMF. serving as a bank for central banks. What is the bank for international settlement? Is an organisation of central banks. 3)the new peer review process for the FSB members and the new FSB-led process to tackle non cooperative jurisdictions. Who are the BIS internal bodies? General meeting. How many countries its membership includes? 57 members plus the ECB. What are their specific functions? The general meeting of member central banks decide on the distribution of the dividend and profit. What are the BIS aims? Bis aims are to fostering international monetary and financial cooperation. It is the oldest international financial institution. the BIS is a meeting place for central banks. but there are two representavive offices in Honk Kong and Mexico City. 2)the new membership commitments to implement international standards. act as a prime counterpart for central banks and serves as a trustee in connection with international financial operations. After the reforms. the FSB has better chances to assume the role of fourth pillar of global economic governance. When was the BIS founded? It was founded in 1930 in the context of the Young plan which dealt with the reparation payment impose to the Germany after the first world war. Where are the BIS headquarters? Its headquarter are in Basel. What are the new powers of the FSB to solve the FSF' capacity problem? Increased capacity arise from the assignment of macroprudential regulation and supervision powers in order to face systemic risk. The FSB has been assigned four new mechanisms to encourage compliance with international standards: 1)the commitment of FSB members to undergo an assessment under the FSAP every five years and to publicize the detailed IMF/WB assessment used as a basis for ROSCs. WB and WTO. board of director and management. what role could the FSB assume in the global economic architecture? After the reform. To carry out its goals. . Which is the nature of the BIS members? It has the legal status of company limited by shares subscribed or acquired only by central banks or by financial institutions appointed by the board.

committee on payment and market infrastructures.approves the annual report and accounts of the bank and select the external auditors. FSB. subsidiaries and joint ventures between host and parent supervisory authorities. central bank governance forum. The Board of Directors is responsible for determining the strategy and policy direction while the management carries out the policy determined by the board of director. continuously enhance their quality of banking regulation and actively contribute to the development of BCBS standards. Which are the aims of the 1975 Concordat? / Which are the prudential tools included in 1975 Concordat to guarantee an adequate supervision of cross-border banks? Aims of the concordat are: to fix guidelines for cooperation between national authorities in the . What are BCBS activities to carry out the mandate? What is its legal status? What is the nature of BCBS regulation? What are the international organization to which the BCBS is accountable for its work? Which are the BCBS regulatory activities? Which are the main areas subjected to the BCBS regulatory power? What were the first principles endorsed by the BCBS? What was the rationale for their endorsement? Which are the fundamentals of 1975 Concordat? The concordat set out principles by which supervisory responsibility should be shared for banks foreign branches. Which is its main mission? Strengthening the regulation. supervision and practices of the banks worldwide. promote financial stability. international association of deposit insurers. promote the interests of global financial stability. Which are the international organisations hosted by the BIS? International association of insurance supervisors. When was the Basel committee created? It was created at the end of 1974 by G10 central banks governor. Which are the BIS standing committees? The Bis standing committees are: BCBS. the group of governors and head of supervisors is the oversight body of the BCBS. How many countries are included in its membership? 27 members plus the EU What are its members commitments? Its members have to work together to achieve the mandate of the BCBS. implement and apply BCBS standards in their domestic jurisdiction within the predefined time frame established by the committee. What is the Basel Committee for banking supervision? The Basel committee is the primary global standard setter for the prudential regulation of banks. committee on global financial system. irving fisher committee on central banks statistic. What are the internal bodies and which are their functions? Not clear. undergo and participate in BCBS reviews to assess the consistency and effectiveness of domestic rules and supervisory practices in relation to BCBS standards. market committee.

What was the rationale for reforming Basel? The increase of banks' trading activities. suggest ways of improving the supervision efficacy. When was the revised capital adequacy framework (Basel II) endorsed? 2004 What was the aim of this reform? Creating an international standard that banking regulators can use to set how much capital banks need to face the types of financial and operational risks they are exposed to. Which is the regulatory area focused by BCBS in recent years? Capital Adequacy What is the rationale for the regulatory intervention in this area? The increasing access of banks in international trade and investments. 3)more results would be achieved through reinforcing rules by exposing bank management to market control. When was the first Basel capital accord introduced? 1988 What prudential instruments did it introduce? It provided the implementation of a credit risk measurement framework with a minimum capital standard of 8%. allow banks to choose. introduce the principle of consolidated supervision of international banking groups. internal value at risk model for measuring their market risk capital requirements. the devolment of increasingly complex derivatives activities. traded debt securities. due to banks' open positions in foreign exchange. need for removing competitive inequalities due to differences in national capital requirements.supervision of banks foreign establishments. What were the reason for further amendments of Basel I? Further amendments were necessary because: 1)capital basic measurement methods was seen to be as over simple in relation to the variation in the risks of different types of financial instruments. 3)attempting to align economic and regulatory capital more close to reduce regulatory arbitrage. the developments of bank assets in the field of securitisation. especially those that used alternative capital measurement method. equities commodities and option. . as an alternative to standardised measurement method. 2)it was judged important to be able to supervise the functioning of the banks' own risk management system. the growth of foreign operations of banks and therefore of competition in the main market places. in particular about capital requirements. the increased sophistication of banks' own risk management. What were the main innovations? 1)ensuring that capital requirements are more risk sensitive. 2)separating operational risk from credit risk and quantifying both. existence of wide differences between jurisdiction. What was the paper reforming Basel I? Market Risk Amendment of 1996 What were the main innovations? Incorporate within Basel I a capital requirement related to the market risks.

way of calculation of capital requirements. What is the content of each one of them? Capital requirements: types of risk.What are the three pillars introduced by Basel II? Minimum capital requirements. the main innovation is the greater use by banks of internal risk assessment system in compliance with a detailed set of minimum requirements. market discipline. What are the main differences between Basel I and Basel II related to the pillar I? What is the rationale for the revision of Basel II? What are the weaknesses of Basel II? What are the preliminary phases for the issuing of the new capital accord (Basel III)? When was Basel III endorsed? When will Basel III fully implemented? . supervisory review. risk position and internal management and control system. minimum capital requirements. giving to regulators many tools of assessment of quality and soundness of banks' internal system of risk management and control. Market discipline: it fixed obligations of disclosure and transparency about banks' capital adequacy. Supervisory review: it deals with regulatory response to pillar I.