Ugeux international finance regulation; the quest for financial stability (2014)

International Finance Regulation Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more For a list of available titles, visit our web site at www.WileyFinance.com International Finance Regulation The Quest for Financial Stability GEORGES UGEUX Cover image: ©iStock.com/barbol88 Cover design: Wiley Copyright © 2014 by Georges Ugeux All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002 Wiley publishes in a variety of print and electronic formats and by print-on-demand Some material included with standard print versions of this book may not be included in e-books or in print-on-demand If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com For more information about Wiley products, visit www.wiley.com Library of Congress Cataloging-in-Publication Data: Ugeux, Georges International finance regulation : the quest for financial stability / Georges Ugeux pages cm — (Wiley finance) Includes bibliographical references and index ISBN 978-1-118-82959-2 (Hardcover) — ISBN 978-1-118-82962-2 (ePDF) — ISBN 978-1-118-82961-5 (ePub) International finance International finance—Law and legislation Banks and banking I Title HG3881.U34 2014 332′.042—dc23 2014003248 Printed in the United States of America 10 To Moritz Erhardt—who died of a seizure after 72 hours without sleep in investment banking—as well as those whose personal, professional, and financial well-being has been destroyed by the selfishness of the leadership of the financial services industry With the hope that this book will contribute to make finance a better world Contents Preface Is Finance in a Stage of Permanent Crisis? Global Markets Are Interconnected Regulating Finance in a World in Crisis A Web of Institutional Complexity Will Global Financial Regulation Become Lex America? Applying Global Regulatory Convergence Regulator and Regulated: The Infernal Couple Finance Cannot Be Left Unregulated Five Years after Lehman, Regulation Could Not Change the Culture A Culture of Outlaws I Will Never Give Up Notes CHAPTER The Multiple Objectives of Financial Regulation Stop (Ab)using Taxpayer Money Protect Retail and Small Investors and Depositors Ensure Transparency of Markets and Institutions Implement a Truly Risk-Adjusted Remuneration System Protect Deposits from Trading Notes CHAPTER A Quarter Century of Banking Crises and the Evolution of Financial Institutions Banking Crises Are Not Exactly a Recent Phenomenon The Two Main Emerging-Market Crises Subprime Crisis Lehman Crisis European Sovereign Debt Crisis xiii xiv xvi xviii xix xx xxii xxiii xxiii xxiv xxv xxvi xxvii 11 12 13 14 16 17 vii viii CONTENTS European Banking Crisis LIBOR Manipulation Will the Foreign Exchange Market Be Next? Notes CHAPTER The Lessons of the Recent Financial Crises: The Explosion of Balance Sheets Structural Overbanking of Europe Lack of Transparency of the Derivative Markets Emergence of the Credit Default Swap (CDS) Market The Regulatory Landscape Is Not Global but Largely National Notes CHAPTER Global Financial Regulation: The Institutional Complexities Group of 20 (G20) Financial Stability Board (FSB) Bank for International Settlements (BIS) and the Basel Committee (BCBS) International Monetary Fund (IMF) International Organization of Securities Commissions (IOSCO) International Accounting Standard Board (IASB) International Association of Insurance Supervisors (IAIS) Notes CHAPTER Capital Adequacy, Liquidity, and Leverage Ratios: Sailing toward the Basel III Rules Part I: Capital Adequacy Part II: Liquidity Part III: Leverage Notes CHAPTER Assessing Likely Impacts of Regulation on the Real Economy Notes CHAPTER Regulating the Derivatives Market Origin of the Derivatives Market Size of the Derivatives Markets 17 19 21 23 27 28 33 34 35 35 37 39 41 42 43 45 46 47 50 53 55 59 62 66 69 73 75 77 78 192 INTERNATIONAL FINANCE REGULATION 11 Regulation should go beyond compliance and lawyers As a law professor, I would be misplaced to question the wisdom and experience of lawyers on matters of regulation However, as important as the drafting of rules and legal arguments can be, financial regulation remains a challenge Facing macroeconomic, social, and political turmoil, financial markets are subject to an incredible set of factors Most of those are not of a legal nature Regulators and central banks are basically ruled by lawyers and politicians So far, they have failed to anticipate possible crises They require integrity 12 Regulators have not been given the means to implement their rules To fight against attorneys paid over $1,000 an hour, CEOs who get paid eight‐figure remuneration, and the best lawyers of companies’ legal departments, regulators have been facing budget reductions and their remuneration scale is appallingly low While public service is a noble task, one cannot expect competent people to accept to be paid low civil servant salaries Their ability to act has also been reduced by the increased interference of political pressure in the United States and many other countries While American experts are willing to accept lower compensation for a few years in government, Europe is based on career civil servants 13 Central banks have lost independence by becoming lenders From a role of liquidity provider to a lending arm of impotent governments, central banks have completely changed the financial landscape The addition of $9 trillion to the balance sheet of the largest of them has transformed them financially and politically By losing their independence to become supports of their overindebted governments and banks, they are changing the game, as well as capital markets, in a way that is financially unsound and creates important exit problems Can they be independent regulators? 14 Asia must become a partner in global regulation Global finance cannot be limited to the Atlantic world With four billion people, the continent will gradually but surely become a key player in the future of finance It might be helpful to have a serious dialogue with Asian financial institutions and regulators While we all pursue an objective of financial stability, it might become obvious that we not necessarily conceive it the same way The development of shadow banking structures could become sources of regional, or even global, instability Asia’s tendency to resort to shadow banking is a major systemic threat for financial stability Will we be able to achieve global financial stability with those unresolved problems? It will require a combination of courage and competence that has, so far, not been displayed by a nationally obsessed political class Conclusion 193 That certainly does not raise expectations that global regulation will be addressed in a professional way We have no choice but to try and persist To end this book, I remember a quote from the Dutch king Willem Ier of Orange (1533–1583): It is not necessary to hope in order to undertake, Nor to succeed in order to persevere A Few Books I Read and Found Helpful THE ACTORS Henry M Paulson Jr., On the Brink: Inside the Race to Stop the Collapse of the Global Banking System Business Plus, 2010, 478 pp William R Rhodes, Banker to the World d McGraw‐Hill, 2011, 249 pp William L Silber, Volcker: The Triumph of Persistence Bloomsbury Press, 2012, 300 pp + 150 pp of texts, notes, and documents George Soros, The New paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means BBS, 2010, 162 pp THE CLASSICS Ken Auletta, Greed and Glory on Wall Street: The Fall of the House of Lehman Random House, 1986, 282 pp Michael Lewis, Liars’ Poker: Two Cities, True Greed d Hodder & Sloughton, 1989, 224 pp THE ACADEMICS John C Coffee, Gatekeepers: The Professions and Corporate Governance Oxford University Press, 2006, 390 pp Howard Davies and David Green, Banking on the Future: The Fall and Rise of Central Banking g Princeton University Press, 2010 Howard Davies and David Green, Global Financial Regulation Polity, 2008, 200 pp Charles Goodhardt, Philipp Hartmann, David T Llewellyn, Liliana Rojas‐Suarez, and StevenWeisbro, Financial Regulation: Why, How and Where Now? Routledge (in association with the Bank of England), 2003 D Quinn Mills, Wheel, Deal and Steel: Deceptive Accounting, Deceitful CEOs and Ineffective Reforms Harvard Business School, FT Prentice Hall, 2003, 300 pp 195 196 A FEW BOOKS I READ AND FOUND HELPFUL Raghuram J Rajan and Luigi Zingales, Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity Crown Business, 2003, 358 pp Michael J Sandler, What Money Can’t Buy: The Moral Limits of Markets FSG, 2012, 244 pp Joseph Stiglitz, Free Fall: America, Free Markets, and the Sinking of the Economy Norton, 2010, 442 pp Daniel K Tarullo, Banking on Basel: The Future of International Financial Regulation: The Essential Guide The Peterson Institute for International Economics, 2008 THE REPORTERS Maria Bartiromo, The Weekend that Changed Wall Street: An Eyewitness Account t Penguin Press, 2010, 232 pp William D Cohen, House of Cards: A Tale of Hubris and Wretched Excess on Wall Streett Doubleday, 2009, 68 pp Kate Kelly, Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Streett Portfolio, 2010, 242 pp Michael Lewis, The Big Short: Inside the Doomsday Machine W W Norton, 2010, 291 pp Michael Lewis, Boomerang: Travels in the New Third World d Allan Lane, 2011, 213 pp Gretchen Morgenson, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon Times Books, 2011, 252 pp Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves Viking, 2009 James B Stewart, Tangled Webs: How False Statements are Undermining America: From Martha Stewart to Bernie Madofff Penguin Press, 2011, 474 pp THE ULTIMATE MANUAL Hal S Scott, International Finance: Law and Regulation Sweet & Maxwell, 2009, 666 pp About the Author G eorges Ugeux is the founder and owner Galileo Global Advisors LLC, providing CEOs, boards of directors, and governments independent advice on international business development, mergers and acquisitions, and raising capital Galileo is specialized in cross‐border transactions to and from emerging markets, particularly India and China Prior to founding Galileo, Georges joined the New York Stock Exchange in September 1996, as group executive vice president, International & Research A 68‐year old Belgian and U.S national, Georges began his career in 1970 at Société Générale de Banque (now BNP Paribas Fortis Bank), where he ran the investment banking and trust divisions He moved to London in 1985, as managing director of Morgan Stanley’s Mergers and Acquisitions department In 1988, he was appointed group finance director at Société Générale de Belgique In 1992, he became president of Kidder, Peabody Europe From 1995 until joining the NYSE, Georges served as president of the European Investment Fund and also chaired the Kingdom of Belgium’s Privatization Commission He is on the board of directors of AXA‐Tianping Insurance (China) Georges is adjunct professor at Columbia Law School, where he teaches a seminar on “European Banking and Finance.” He is regularly called to speak or comment on international financial matters and recently published a book entitled The Betrayal of Finance: Twelve Reforms to Restore Confidence, published in French (Odile Jacob, Paris), English (available at lulu com and Amazon.com), and Flemish (Lannoo, Belgium) 197 Index A Abenomics, 145 Accountability limits of, 136 of managers and directors, 182 personal or institutional, 153–154 AIG, xiv, 40–50, 64 Anglo-Saxon common law system, 184 Applegarth, Adam, xvii Arthur Andersen, 135, 136 Asia, perspective on global financial crisis, 157–164 Asian risk, assessing, 162–163 China, 160–161 India, 161–162 Japan, 158–160 financial institutions, 158 financial system, restructuring, 158–159 public opinion and approach to moral hazard, 159–160 soundness of banking system, 159 Auditors, external, 134–135 regulation of, 135 Australian Association of Corporate Directors, 152 B Bail-in concept, 103–104 Bailout, xiv, xv, 3, 16–19, 76, 94, 102, 103–104, 111, 171, 173 Bair, Sheila, 87, 107 Bank of America, 89, 151 Bank balance sheets, xxii, 27–35, 54–55, 62–64, 72, 73, 97, 128, 139–140, 145–147, 170, 173, 190, 191 Bank culture, xxv–xxvi Bank deposits, 3–5, 7–8, 29, 30, 60–61, 82, 89, 94, 107–109, 114–116, 146–147, 191 Bank of England, xv, 21, 23, 101, 110, 140, 144 Bank governance See Governance, financial institution Bank for International Settlements (BIS), 39, 42–43, 145–147 Bank of Japan, 145 Bank loans, 29, 30, 44, 61, 125, 128–129 Banking resolution and recovery, 101–124, 171–172 bail-in concept, 103–104 Citibank recovery plan, 106–107 deposit guarantee system, 7–8, 114 European directive, 111 European institutional challenge, 113–114 Federal Deposit Insurance Corporation (FDIC), role of, 107–109 financial crisis, lessons from, 104 living will, 104 moral hazard, 102–103 Regulatory Technical Standards (RTSs), 112 resolution rules, effectiveness of, 112–113 resolution surveillance, decision process for, 114, 116–120 United Kingdom, 110 United States, 105–106 and shadow banking, 125–130 capital markets and securitization, 128–129 199 200 Banking (continued) hedge funds, 125–127 other types of, 127–128 structure of, 87–100 European Union, 91–92 prohibition of commodities trading, 97–98 separation models, 90 Switzerland, 92 systemically important financial institutions (SIFIs), 87–89 Too big to fail (TBTF), 95–97 United Kingdom, 90 United States, 90–91 universal banking model, 89 Volcker Rule and proprietary trading, 92–95 Barclays Plc, xiii, 89, 104, 113 Barnier, Michel, 58, 75, 91 Basel Committee on Banking Supervision (BCBS), 43, 54, 63 Basel I, 58 Basel II, regulatory failure of, 57–58 Basel III, 54–67, 172, 191 BBVA Research, 65 Bear Stearns, xvii Bernanke, Ben, xvii, 61–62 BNP Paribas, xvii–xviii Boards of directors, 151–152 Bretton Woods, 44–45 Buffett, Warren, 76, 174 C Capital adequacy, 54–59, 63–66 Basel I, 58 Basel II, regulatory failure of, 57–58 European Capital Requirements Directive IV, 58–59 European insurance sector (Solvency II), 63–66 ratios, 55 Capital markets and securitization, 128–129 reemergence of, 173 INDEX Capital Requirements Directive IV (Europe), 58–59 Carney, Mark, 129 Central banks, as lenders of last resort, 139–148, 192 balance sheets, expansion of, 145–146 financial stability, 140 Japan and Abenomics, 145 legitimacy/legality of, 147 long-term refinancing operations (European Central Bank), 143–144 quantitative easing (United States), 140–143 United Kingdom, 144–145 Chairperson as CEO, 152–153 Chicago Council on Global Affairs, 95 China, perspective on global financial crisis, 160–161 Citibank, 22, 89, 106–107 recovery plan, 106–107 City of London Law Society, 80 Coffee, John C., xxi–xxii, 37, 103–104 Commodities Futures Trading Commission (CFTC), 78–79 Complexity, institutional, xix–xx Crédit Agricole, 21 Credit default swap (CDS) market, emergence of, 34–35 Credit Suisse, 92 Crisis resolution, 101–120, 171–172 Cyprus financial crisis, D De Grauwe, Paul, 71 Deposit insurance exclusions, 116 Derivatives market lack of transparency of, 33–34 regulating, 75–85 Dodd-Frank Act, 78–79 European Market Infrastructure Regulation (EMIR), 79 JPMorgan Chase London trading losses, 82–83 201 Index origin of, 77 short selling, 81–82 size of, 78 transatlantic divergences, 80–81 Deutsche Bank, 21 Dimon, Jamie, xx, 37 Dodd-Frank Act of 2012, xix, 27, 78–79, 90, 107–108, 127, 133 and regulation of rating agencies, 133 Draghi, Mario, 101 E Economic and Financial Affairs Council (ECOFIN), 118 El-Erian, Mohamed, 147 Emerging-market crises, 13–14 Ethics See Regulation and ethics Europe, structural overbanking of, 28–33 European Banking Authority, 112, 172 European banking crisis, 17–19 Germany, 19 Ireland, 18 Portugal, 19 Spain, 19 United Kingdom, 18 European Capital Requirements Directive IV, 58–59, 152 European Central Bank (ECB), xvii, xix, 11, 113, 143–144, 169–170 long-term refinancing operations (LTROs), 143–144 supervision of banks in the eurozone, 169–170 European Commission, 7, 17, 18, 114 European Insurance and Occupational Pensions Authority (EIOPA), 50 European Market Infrastructure Regulation (EMIR), 79 European Proposal of Banking Resolution and Recovery Directive (BRRD), 111 European Securities and Market Authority (ESMA), 80 European sovereign debt crisis, 17 European Union, banking structure in, 91–92 External auditors, 134–135 regulation of, 135 F Federal Deposit Insurance Corporation (FDIC) assets, 28–29, 107–109 role of, in resolution of bank crises, 107–109 Federal Reserve, xvii, xviii–xix, 11, 71–72, 105–106, 141–143, 184 approach to resolution and recovery, 105–106 and quantitative easing (QE), 141–143 Financial communication, regulation of, 174–175 Financial crises, 11–36, 104 See also Global financial crisis, Asian perspective on European banking crisis, 17–19 European sovereign debt crisis, 17 foreign exchange market, 21–23 Lehman crisis, 16–17 lessons from, 104 LIBOR manipulation, 19–21 main emerging-market crises, 13–14 recent, lessons of, 27–36 credit default swap (CDS) market, emergence of, 34–35 derivative markets, lack of transparency of, 33–34 regulatory landscape, 35 structural overbanking of Europe, 28–33 subprime crisis, 14–15 Financial education, 176–77 Financial services industry culture of, xxv–xxvi regulating, xviii–xix Financial institution governance See Governance, financial institution 202 Financial media, code of conduct for, 175–176 Financial products, 45, 58, 73, 79, 93, 111, 127, 128, 177 derivative, 79, 111 fixed income, 76 investment management, 93 mortgage, 128 securitized, 58 Financial regulators, xxiii–xxv Financial regulation global, xx–xxii, 35, 37–52 Bank for International Settlements (BIS), 42–43 Basel Committee on Banking Supervision (BCBS), 43 Financial Stability Board (FSB), 41–42 Group of 20 (G20), 39, 41 International Accounting Standards Board (IASB), 46–47 International Association of Insurance Supervisors (IAIS), 47–50 International Monetary Fund (IMF), 43–45 International Organization of Securities Commissions (IOSCO), 45 impact on economy, assessing, 69–74 cost of financing, increased, 70–71 equity financing, reduced availability of, 72 liquidities, drying up of, 71 shadow financial services, 72–73 objectives of, 1–9 protecting deposits from trading, 7–8 retail and small investors and depositors, protecting, 3–5 risk-adjusted remuneration system, implementing, 6–7 taxpayer money, abuse of, 2–3 transparency of markets and institutions, INDEX Financial stability expectations for, 189–193 three pillars of, 54 Financial Stability Board (FSB), 6, 41–42, 73, 96, 109, 149, 190 Financial Stability Oversight Council, xix, 91, 190 Fink, Larry, 64 Foreign Account Tax Compliance Act (FATCA), xxi Foreign exchange market, 21–23 Fuld, Richard, 16–17 G Glass-Steagall Act, 27 Global financial crisis, Asian perspective on, 157–164 Asian risk, assessing, 162–163 China, 160–161 India, 161–162 Japan, 158–160 financial institutions, 158 financial system, restructuring, 158–159 public opinion and approach to moral hazard, 159–160 soundness of banking system, 159 Global financial regulation, xx–xxii, 35, 37–52, 165–179 Bank for International Settlements (BIS), 42–43 Basel Committee on Banking Supervision (BCBS), 43 challenges of, 165–179 bank resolution, 171–172 Basel III, 172 capital markets, reemergence of, 173 European Central Bank supervision, 169–170 financial communication, regulation of, 174–175 financial education, 176–77 financial media, code of conduct for, 175–176 203 Index regulatory fragmentation, risks of, 171 regulators and sovereign financing, 169 restructuring finance, 173–174 Financial Stability Board (FSB), 41–42 Group of 20 (G20), 39, 41 International Accounting Standards Board (IASB), 46–47 International Association of Insurance Supervisors (IAIS), 47–50 International Monetary Fund (IMF), 43–45 International Organization of Securities Commissions (IOSCO), 45 Global markets, interconnectedness of, xvi–xviii Global OTC derivatives, 78 Global regulatory convergence, xxii Global Stability Report, Governance, financial institution, 149–155 accountability, personal or institutional, 153–154 boards of directors, dysfunctional, 151–152 chairperson as CEO, 152–153 remuneration and risks, 153 risk management, 150–151 Greece, financial crisis in, 17 Greenberg, Hank, 50, 64 Greene, Edward, 76 Greenspan, Alan, 149 Group of 20 (G20), 6, 39, 41 H Haircuts, 71 Hedge funds, 125–127 Europe, 127 United States, 127 Heineman, Ben, 96–97 HSBC, 21, 90 Huffington, Ariana, 177 Huszar, Andrew, 141–142 I India, perspective on global financial crisis, 161–162 Industrie Kredit Bank (IKB), xvii–xviii Institute of International Finance (IIF), 150–151, 167, 171 Insurance Europe, 47 Insurance regulation, 47–50, 63 global, 47–50 International Accounting Standards Board (IASB), 46–47 International Association of Insurance Supervisors (IAIS), 47–50 International Financial Reporting Standards (IFRSs), 46 International Monetary Fund (IMF), xvi, xviii, 3, 13, 43–45, 169 International Organization of Securities Commissions (IOSCO), 45, 73 Ireland, financial crisis in, 18 Italy, xiii–xiv, 29, 39, 111, 115, 144 J Jackson, Laban, 151 Japan, 145, 158–160 and Abenomics, 145 financial institutions, 158 financial system, restructuring, 158–159 public opinion and approach to moral hazard, 159–160 soundness of banking system, 159 Jenkins, Antony, xiii Johnson, Simon, 14 JPMorgan Chase, xvii, xx, 21, 22, 37–38, 82–83, 89, 151–152, 185–186 Code of Ethics of, 185–186 London trading losses, 82–83 L Lacker, Jeffrey, 105–106 Lagarde, Christine, 44, 157 204 Lehman Brothers, xiv, xxiii, 89 crisis, 16–17, 104, 113 Leverage, 62–66 Levin-McCain report, 82 LIBOR See London interbank offered rate Liikanen Report, 7, 29, 32, 89, 91–92, 94 Liquidity, 59–62 Living will (United Kingdom), 104, 110 Lloyds Bank, 18, 145 London interbank offered rate (LIBOR), xxiv, 11 crisis, xxiv–xxv, 19–21, 181 Long-term refinancing operations (LTROs), 143–144 INDEX Proposal of Banking Resolution and Recovery Directive (BRRD), 111 Proprietary trading, 92–95 Public Company Accounting Oversight Board (PCAOB), 135 Q Quantitative easing (United States), 140–143 R Omnibus II See Solvency II Organization for Economic Cooperation and Development (OECD), 149–150 OTC derivatives, global, 78 Overbanking, 28–33, 190 Rajan, Raguram, 161–162 Rating agencies, 131–134 regulating, 132–133 sovereign ratings, 133 Regulation and ethics, 181–187 accountability, 182 management integrity, 182 principles, 183–184 righteousness vs compliance, 184–186 transparency, 183 Regulatory fragmentation, risks of, 171 Regulatory Technical Standards (RTSs), 112 Repo financing, 71 Remuneration, xxvi, 6–7, 150, 153, 191 risk-adjusted system, 6–7 Reserve Bank of India (RBI), 161–162 Resolution and recovery See Banking Retail and small investors and depositors, protecting, 3–5 Risk-adjusted remuneration system, implementing, 6–7 Risk management, 150–151 Royal Bank of Scotland (RBS), 18, 21, 114, 145 P S Pan, Eric, 39, 40 Paulson, Hank, 112–113 People’s Bank of China, 140, 161 Portugal, banking crisis in, 19 Potiha, Ilena, 76 PricewaterhouseCoopers, 182 Scott, Hal S., 183 Securities and Exchange Commission (SEC), xxiii, 174 Securitization, 128–129 Separation models, 90 Shadow banking, 125–130, 161, 162 M Management integrity, 182 Masters, Brooke, 110 McKenna, Lisa, 114, 116 Monte dei Paschi di Siena (Italy), xiii–xiv, 111 Moral hazard, 102–103 Morgan Stanley, 97–98 N National Security Agency, xx Northern Bank (United Kingdom), 145 O 205 Index capital markets and securitization, 128–129 in China, 161 hedge funds, 125–127 Europe, 127 United States, 127 in India, 162 other types of, 127–128 Shafer, Jeffrey, 15 Shearman and Sterling, 108–109 Shinohara, Naoyuki, 44 Short selling, 81–82 Single point of entry (SPOE) strategy, 108–109 Société Générale, 21 Solvency II (Omnibus II), 47, 50, 63–66 Sovereign debt, xiv, 1, 13, 16, 17, 29, 62, 65, 120, 169 European, 17 Spain, banking crisis in, 19 State of the Union address (2009), 2–3 Stravakeva, Vania, 76 Structural issues, xviii, 28, 33, 43, 61, 87, 142, 170, 191 Subprime crisis, 14–15 Summers, Larry, 12–13, 142 Switzerland, banking structure in, 92 Systemically important financial institutions (SIFIs), 87–89 T Tarullo, Daniel K., 53 Taxpayers, 2–3, 7, 59, 89, 90, 91, 101–104, 110, 111, 114, 118, 141, 146, 160, 173, 191 money, abuse of, 2–3 Too big to fail (TBTF), 70–71, 87, 95–97, 173 Towers Watson, 64–65 Transatlantic divergences, 80–81 Transparency of markets and institutions, 5, 183 Tucker, Paul, 125 U UBS, 92 United Kingdom banking resolution and recovery plans in, 110 banking structure in, 90 financial crisis in, 144–145 United States banking resolution and recovery plans in, 105–106 FDIC, role of, 107–109 banking structure in, 90–91 Universal banking model, 89 U.S Treasury, 47–48 V Vickers Commission, 90 Vickers Report, 91–92 Volcker, Paul, xx, 93, 139 Volcker Rule, xxi, 72, 82, 90, 92–95 See also Dodd-Frank Act and proprietary trading, 92–95 W Wigand, Jim, 108 Wright, David, 75, 129 Y Yellen, Janet, 142 WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA ... neither should we forecast, that finance can be more stable or provide stability to the rest of the world After all, the Financial Stability Forum, assembling the smartest and the brightest central... Congress Cataloging-in-Publication Data: Ugeux, Georges International finance regulation : the quest for financial stability / Georges Ugeux pages cm — (Wiley finance) Includes bibliographical references... as well as much more For a list of available titles, visit our web site at www.WileyFinance.com International Finance Regulation The Quest for Financial Stability GEORGES UGEUX Cover image: ©iStock.com/barbol88