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Financial regulation

L ecture 17 Discussion on Industrial Finance Systems Paper by Sjögren&Kishida , download from the course web: Lecture17-paperKishida Lecture 18 Discussion on Nordic Financial Crises Paper by Knutsen&Sjögren , download from the course web: Lecture18-paperKnutsen.

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Financial regulation

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  1. Lecture 17 Discussion on Industrial Finance SystemsPaper by Sjögren&Kishida, download from the course web: Lecture17-paperKishidaLecture18 Discussion on Nordic FinancialCrisesPaper by Knutsen&Sjögren, download from the course web: Lecture18-paperKnutsen

  2. Financialregulation Lecture16

  3. Task during the second half of Lecture 18 Discussonefinancialcrisis in yourhome-country or likewise, in terms of regulatoryregime, before and after the crisis

  4. FinancialRegulatoryRegime Governmental activities • Rules established by regulatory agencies • Supervision by official agencies • Intervention arrangements in the event of failures Market activities • The role of market discipline and monitoring • Internal corporate governance within banks and financial companies Activities combining governmental and market activities • Incentive structures established by regulatory agencies, consumers and banks

  5. Regime Changes and the Structure of European Post World War II Banking Hard regime1945-1980 Strong politicalregulations in the capital market Soft regime1980-2010 Deregulation - guiding principals replacedpoliticalregulations

  6. Hard regime1945-1980 • Oligopolistic market • Banks werelocked in • Fewfinancial innovations (sleepy stock exchange) • Banks reluctanttotake risks • Lowincentives for entrepreneurs • Preservedlargecompanies • Contributetostabilze the economy • Lowered rate ofeconomicgrowth

  7. Soft regime1980-2010 • Strongerorientationtowardscustomers • High rate ofliquidity, offensive lendingpolicies • Increasedcompetitionamong banks • Foreign banks • Higher risks, speculative boom, property market • Financialcrisisin Nordic countries, state intervention • Mergers - saving banks and commercial banks • Integration ofinsurance, mortgage and banking • New niche banks

  8. Regime changes in Sweden’s financial system 1945-2010 Structure Market development Hard regimeStable National market Undynamic Risk avert Soft regime Flexibility Globalisation Concentration Enlarged market Niche banks Increased risk Integration

  9. Advances to the public from Swedish banks 1945–1985. Percentage

  10. Advances to the public from the Swedish banks 1985–2008. Market share in per cent.

  11. The annual growth of total credit volumes in Swedish banks 1985–1989. Percentage.

  12. Task during the second half of Lecture16 Discussonefinancialcrisis in yourhome-country or likewise, in terms of regulatoryregime, before and after the crisis

  13. FiveKeyRegulatorybodies in the EU • The European Banking Authority (EBA) is a regulatory agency of the European Union. The EBA has the power to overrule national regulators if they fail to properly regulate their banks. • Common Reporting (COREP) is the standardized reporting framework issued by the European Banking Authority (EBA) for the Capital Requirements Directive reporting. It covers credit risk, market risk, operational risk, own fund and capital adequacy ratios. This reporting framework has been adopted by almost 30 European countries.

  14. More… • The European System of Financial Supervisors is an institutional architecture of the EU's framework of financial supervision created in response to the financial crisis. • The European Systemic Risk Board (ESRB) was established on 16 December 2010 in response to the ongoing financial crisis. It is tasked with the macro-prudential oversight of the financial system within the Union in order to contribute to the prevention or mitigation of systemic risks to financial stability in the Union.

  15. And twomore.. • The European Securities and Markets Authority (ESMA) is a European Union financial regulatory institution and European Supervisory Authority. ESMA works in the field of securities legislation and regulation to improve the functioning of financial markets in Europe, strengthening investor protection and cooperation between national competent authorities. • The European Insurance and Occupational Pensions Authority is a European Union financial regulatory institution.

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