Global Bank Regulation

Principles and Policies


  • Heidi Mandanis Schooner, Columbus School of Law, The Catholic University of America, Washington D.C.
  • Heidi Mandanis Schooner, Columbus School of Law, The Catholic University of America, Washington D.C.
  • Michael Taylor, International Monetary Fund
  • Michael Taylor, International Monetary Fund

Global Bank Regulation: Principles and Policies covers the global regulation of financial institutions. It integrates theories, history, and policy debates, thereby providing a strategic approach to understanding global policy principles and banking. The book features definitions of the policy principles of capital regularization, the main justifications for prudent regulation of banks, the characteristics of tools used regulate firms that operate across all time zones, and a discussion regarding the 2007-2009 financial crises and the generation of international standards of financial institution regulation. The first four chapters of the book offer justification for the strict regulation of banks and discuss the importance of financial safety. The next chapters describe in greater detail the main policy networks and standard setting bodies responsible for policy development. They also provide information about bank licensing requirements, leading jurisdictions, and bank ownership and affiliations. The last three chapters of the book present a thorough examination of bank capital regulation, which is one of the most important areas in international banking. The text aims to provide information to all economics students, as well as non-experts and experts interested in the history, policy development, and theory of international banking regulation.
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Academics and advanced-level students interested in the theory, history, and policy development of international banking regulation


Book information

  • Published: October 2009
  • ISBN: 978-0-12-641003-7


"This wide-ranging and authoritative book, written by two distinguished analysts of financial regulation, is a compelling read and of great value to regulators, financial practitioners and students alike. It is an excellent tour de force of the key issues in bank regulation which is set in a strong analytical framework. In the light of the global financial crisis, it makes a compelling case for an internationally coordinated approach to bank regulation."--David T. Llewellyn, Loughborough University

 "A fascinating and erudite introduction to the policies underlying bank supervision and the complexities of implementing those policies in an international environment based on national regulatory systems. Schooner and Taylor are among the world’s leading experts on banking regulation and their text will be an invaluable resource to students and practitioners for years to come." --Howell E. Jackson, Harvard Law School

"Heidi Schooner and Michael Taylor have produced a work of the highest quality which is balanced and focused with the right amount of detail.  considerable thought has obviously been given to design and structure.  All relevant topics received expert attention."  "This book will become the leading point of reference for those who need to understand bank regulation within the global context.  I am happy to fully recommend it without hesitation."  -- Andrew Campbell, School of Law, University of Leeds.  Full review - Journal of International Banking Law and Regulation, Volume 26, Issue 3, 2011.

Table of Contents

Introduction: The Global Financial System and the Problems of Regulation

1. The Changing Nature of Banks


Money, Credit Creation, and Fractional Reserve Banking

Financial Innovation and the Changing Nature of Banks

Three Distinctive Features of Modern Banking


Further Reading

2. Panics, Bank Runs, and Coordination Problems

The Structure of Banks’ Balance Sheets

Coordination Problems and Bank Runs

Panic and Contagion in Modern Financial Systems

Free Riders and Regulation


Further Reading

3. Collapsing Dominos and Asset Price Spirals

Collapsing Dominos

Asset Price Spirals

The Global Financial Crisis of 2007-2009


Further Reading

4. The Financial Safety Net and Moral Hazard

The Financial Safety Net

Moral Hazard

Is There an Alternative?


Further Reading

5. Sources of Financial Regulation

National Laws

International Law


Further Reading

6. Bank Licensing and Corporate Governance

The Purpose of Bank Licensing

The Fundamentals of Bank Licensing

Fitness and Propriety of Bank Management

Significant Changes in Ownership

Choice of Bank Charter

Cross-Border Issues

Principles of Sound Corporate Governance

Sarbanes-Oxley Act of 2002


Further Reading

7. Bank in Corporate Groups: Ownership and Affiliation

Bank-Commerce Linkages

The Separation of Banking and Finance

Changes to Structural Regulation of the Combination of Banking and Other Financial Services


Further Reading

8. The Rationale for Bank Capital Regulation

Why Regulate Bank Capital?

Leverage Ratios

Risk-Weighted Capital

Criticisms of the Basel Capital Accord


9. The New Capital Adequacy Framework: Basel II and Credit Risk

The Standardized Approach

The Internal Ratings-Based (IRB) Approaches

Dealing with Financial Innovation


Further Reading

10. The New Capital Adequacy Framework: Basel II and Other Risks

Market Risk

Operational Risks

Pillar 2 Risks


Further Reading

11. Direct Limits on Banks’ Risk Taking

Credit Concentration Risk

Liquidity Risk


12. Consolidated Supervision and Financial Conglomerates

What Is Consolidated Supervision?

The Need for Consolidated Supervision

Consolidated Supervision of Cross-Border Banks

Financial Conglomerates


13. Anti-Money Laundering

What Is Money Laundering?

The Impact on Banks

International Response

Banco Delta Asia Case Study


Further Reading

14. Bank Insolvency

The Goals and Types of Bank Insolvency Regimes

Legal Framework for Bank Insolvency

Determination of Insolvency

Administration Orders and Conservatorships



Further Reading

15. Institutional Structures of Regulation

Institutional and Functional Regulation

Rise of the Integrated Regulator

Twin Peaks (Objectives) Approach

Role of the Central Bank in Bank Supervision

Evaluation of Structural Reforms


Further Reading

16. Regulation After the Global Financial Crisis

The Causes of the Crisis

Rethinking the Assumptions of Regulation

New Directions in Capital Adequacy

More Radical Options

The International Dimension


Appendix: Introduction to Regulation and Market Failure