Current Problems of Banking Supervision and Regulation: A New Evidence

E.V. Kruglikova, T.K. Blokhina and O.A. Karpenko

European Research Studies Journal, 2018, vol. XXI, issue 4, 40-54

Abstract: At present, in the era of globalization, the banking sector failure in one country can cause negative externalities for the financial institutions of other states. The fundamental problem of implementing standards based on Basel II is that these standards contribute to the development of pro-cyclicality of banking regulation. The authors emphasize the need to design such a regulatory system, which should contribute to innovative development and at the same time restrain socially dubious novelties. Therefore, the article substantiates the need to increase the size of the capital "buffer", which is intended to address the problem of improving the financial situation and increasing the financial viability of the largest banks and banking systems. This reduces risks and increases the capital "safety cushion", as well as optimizes the impact on the commercial banks behavior caused by the use of counter-cyclical capital regulation requirements.The conducted research supported the hypothesis put forward by the authors that when forming a countercyclical capital buffer it is necessary to focus on indicators of: return on assets of the banking system (RO?) and return on equity (ROE), depending on GDP growth, but this dependence does not become evident immediately, but with a time lag of 1 year. The object of the research is the banking system of Russia.

Keywords: Banking sector regulation; banking supervision; counter-cyclical capital buffers; capital adequacy ratio; Granger test; cointegration. (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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